IBC resolutions exceed new time limit of 330 days prescribed by govt

The average time taken for completion of 156 CIRPs that have yielded resolution plans has overshot the government's revised deadline of 330 days for completion of the process.

According to the Insolvency and Bankruptcy Board of India (IBBI) data, till September 2019, 156 CIRPs have yielded resolutions and the average time taken for resolution, including the time excluded by the adjudicating authority (AA) is 374 days; if the time excluded by the AA is considered then the average time taken would stand at 347 days. Either way, the time taken for resolution is more than the government's revised deadline of 330 days.

In July, in a bid to expedite the resolution process, the government made amendments to the Insolvency and Bankruptcy Code (IBC) that included revising the time limit to 330 days. The amendments though passed by the Parliament are facing a legal challenge in the Supreme Court by operational creditors to Essar Steel.

The outside time limit for resolutions earlier was 270 days. In many cases however that timeline had been breached largely due to litigation from different stakeholders. In most cases, insolvency courts had excluded the time period of litigation.

ICRA vice president, Abhishek Dafria, said, CIRPs, on an average, continue to take more than the initial 270-day timeline and exceed even the revised 330-day timeline.

As on September 30, 2019, 535 of the 1,497 onging CIRPs had exceeded the 270-day timeline; 324 had exceeded 180 days but were within 270-day timeframe. The total number of cases admitted were 2,542.

"The increasing number of cases being admitted challenges the NCLT infrastructure to close cases in a timely manner. CIRPs that are ongoing have reached an all-time high with close to 1,500 as at the end of September 2019," said Dafria.

While the average time taken is 374 days, there are cases from the RBI's first list of NPAs mandated for resolution under the IBC that have now been dragging for more than two years like Essar Steel and Bhushan Power & Steel. Essar Steel was admitted on August 2, 2017 and Bhushan Power on July 26, 2017.

Insolvency professional, Sumit Binani, said that timely resolution was one of the basic objectives of the Code. "The timeline was revised as it  was not being maintained. The amended maximum resolution time limit of 330 days which includes the litigation period would ensure that the two important pillars of the Code i.e. the resolution professional and the adjudicating authority take timely steps to complete the process," he said.

Binani pointed out that the infrastructure was also being beefed up to gear up to the new timeline. More members had been added, new places and newer buildings were being looked at so that more courts could be added.

"There would also be separate benches for NCLAT in all metros with the first coming up in Chennai," he said.

If the resolution process is not completed within 330 days, then an order would be passed for liquidation. The average time taken for completion of 156 CIRPs that have yielded orders for liquidation however is 300 days.

About 56.17 per cent of the CIRPs that were closed ended in liquidation compared to 14.93 per cent ending with a resolution plan. However, 72.86 per cent CIRPs ending in liquidation were earlier with the BIFR or defunct.