Defending the recoveries under The Insolvency and Bankruptcy Code (IBC), IBBI Chairman Ravi Mittal said that the IBC recovers as much as 84 percent of fair value of the companies as 50 percent of the asset’s value is already lost due to delay in admission by creditors.
“When cases are admitted in IBC, they have already lost 50 percent of the value. IBC is not responsible for cases brought late. IBC recovers 84 percent of the fair value and 174 percent of liquidation value,” Mittal said at the eighth annual day of Insolvency and Bankruptcy Board of India (IBBI).
The recoveries under IBC stand at 31-32 percent of the admitted claims.
Fair value refers to the estimated realisable value of assets if they were exchanged between a willing buyer and a willing seller, both acting independently and at arm's length, as of the insolvency commencement date.
Liquidation value refers to the estimated recoverable worth of a corporate debtor's assets if the debtor were to undergo liquidation as of the date when insolvency proceedings begin.
Addressing the delays under IBC, Mittal said that in India the debtors try to delay the admission of companies in NCLT in India.
“Delays in IBC are because of the creditor-controlled model in India as opposed to debtor-controlled model in other countries. Debtors try to delay admission in NCLT in India,” he said.
India's recovery rate, however, is comparable to that in Europe, and is even better than in the US, he added.
The market cap of companies resolved by NCLT has in fact grown six times in three years as the unproductive assets have become productive, the IBBI Chairman said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
