 "NCLT, Resolutions")
A record number of 269 resolution plans were approved by the National Company Law Tribunal under the Insolvency and Bankruptcy Code (IBC) in FY24, up 42 per cent from the last year, the Insolvency and Bankruptcy Board of India (IBBI) said in its newsletter for January-March 2024.
“FY23-24 has witnessed an unprecedented surge in the approval of resolution plans under the IBC, showcasing the effectiveness of the legal framework in facilitating the revival of insolvent businesses,” IBBI chief Ravi Mittal said in the newsletter.
In the financial year 2023, the NCLT had approved 189 resolution plans with a realisation of 32 per cent against the admitted claims. Prepackaged insolvency resolution process has resulted in 25 per cent realisation against the admitted claims, IBBI data revealed.
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There is also an improvement in the ratio of resolution versus liquidation cases from 0.46 in FY23 to 0.61 in FY24.
IBBI said there is a notable shift in debtor behaviour towards early settlement, with 308 stressed companies getting rescued through withdrawal, appeal, or settlement by the stakeholders.
Till March 2024, 28,818 applications for initiation of corporate insolvency resolution process with a default of Rs 10.22 lakh crore were withdrawn before admission.
The latest newsletter said thousands of debtors are resolving distress in the early stages when the default is imminent, on receipt of a notice for repayment but before the application or after filing but before admission, to avoid consequences of the resolution process.
However, it is still taking 679 days on average to conclude the resolution process, as against the standard timeline of 330 days.
The delays often due to litigations by multiple stakeholders with competing interests, erode the value of already distressed corporate debtors, and minimises the recovery value to the creditors.
“It is important for all the stakeholders to expedite decision-making during the process in the collective interest of all,” Mittal added.
Some of the steps taken by the IBBI to reduce delays include putting a cap on the number of modifications to the resolution plan, sharing information by creditors with the resolution professional, among others.
“Continued efforts to streamline the resolution process, enhance transparency, and provide greater clarity on regulatory requirements are underway to further bolster the effectiveness of the IBC,” IBBI chairperson said.
The corporate insolvency resolution process for four financial service providers has resulted in the realisation of 41 per cent of the admitted claims, IBBI said.
The data also showed that the cases that were previously with the Board of Industrial and Financial Reconstruction or defunct and referred to IBC, have seen the realisation of around 20 per cent of the admitted claims.
