Record 273 stressed cases resolved via IBC

Record 273 stressed cases resolved via IBC

A record 273 stressed firms were rescued through the insolvency law in 2023 and the resolutions fetched their creditors more than three times the amount raised through 160 such debt resolutions in 2022, a senior official told ET, citing data compiled by the bankruptcy regulator.

The realisation proceeds were to the tune of ₹67,000 crore in 2023 against ₹20,860 crore in 2022, according to the Insolvency and Bankruptcy Board of India (IBBI) data yet to be made public. The jump indicates a “robust upward trajectory” in the IBC’s (Insolvency and Bankruptcy Code’s) effectiveness, the official said.

A Delhi-based expert involved in shaping the insolvency policy said the 2023 resolution numbers also mirror the broader economic momentum being witnessed after the pandemic blues, which has expanded the universe of bidders for stressed assets. Also, the appointment of about three dozen members to the National Company Law Tribunal (NCLT) over a year through September 2023 expedited the resolutions process in 2023, the expert said.

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Cumulatively, 887 insolvent firms saw resolution between late 2016, when the IBC was adopted, and December 2023. The total realisation for creditors stood at about ₹3.2 lakh crore, or nearly 32% of their admitted claims, the official said, citing preliminary IBBI data.

The realisation from these stressed firms was 168% of their liquidation value when they were admitted for resolution, according to the IBBI data.

The recovery improved in 2023, thanks to improved investor interest in a broad range of small and medium enterprises and above-average realisation from the assets of Srei Group. The resolution of Srei Equipment Finance and Srei Infrastructure Finance in the September quarter alone fetched ₹13,785 crore, against the admitted claims of ₹33,050 crore. The resolution process is expected to soon get a tech boost, as the government is planning to set up an integrated platform for easy flow of information about insolvency cases. The portal will join key pillars of the insolvency eco-system, such as the National Company Law Tribunal (NCLT), the Insolvency and Bankruptcy Board of India (IBBI), information utilities, resolution professionals, the Ministry of Corporate Affairs (MCA) and the National Company Law Appellate Tribunal (NCLAT), an official said last month. The information available with each of them pertaining to various cases could be seamlessly accessed by other pillars once the integrated portal is ready.

Settlement before admission

The IBBI data showed creditors had withdrawn 27,514 insolvency cases, covering defaults of as much as ₹9.74 lakh crore, before their applications were admitted by the adjudicating authority since IBC’s adoption in 2016 until October 2023.

It essentially suggests creditors have either recovered money from debtors or forced them to settle dues just by posing the IBC threat, experts said, adding the regime has fostered greater credit discipline among borrowers. Defaulting promoters run the risk of losing control of companies once insolvency cases are admitted by the National Company Law Tribunal (NCLT).

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