About 13 percent of corporate insolvency resolution processes (CIRPs) until the end of March 2019 were resolved, while 53 percent cases ended in liquidation, according to data from the Insolvency and Bankruptcy Board of India (IBBI). Average realisation by financial creditors as a share of claims was only 43 percent.
In its report, the IBBI said 359 cases had been admitted for corporate insolvency. Of this, the resolution plan for 14 was approved while 73 went into liquidation in the January-March quarter.
The Insolvency and Bankruptcy Code (IBC) was set up to resolve cases of corporate bankruptcy in a timely manner. However, a third of these cases took more than the stipulated 270 days. For 1,143 ongoing resolution cases, the deadline has already been breached.
Lenders have been forced to sell their stressed exposure to asset reconstruction companies (ARC) due to these delays, and their cash flows have been hit badly. Involved companies, their prospective buyers and creditors want the best deal out of the process, which gets in the way of a timely resolution. Another reason for the delays is different standpoints of the judges of the National Company Law Tribunal (NCLT).
The Essar Steel insolvency case has dragged on for over 650 days now and the final result is still nowhere in sight. This delay is reportedly costing the main lender, State Bank of India, Rs 17 crore per day.
The NCLT and other appellate tribunals have also been given the responsibility of cases linked to the Companies Act and the Competition Act apart from IBC cases. This crowding may also a reason the process is time-consuming, according to experts.
About 150 companies found closure through an appeal process or a review, while close to 91 corporate debtors found closure via withdrawal under Section 12A of IBC. The data also showed that of the 1,858 total cases, 738 cases were introduced to the IBC by the financial creditors and 200 were initiated by corporate debtors.
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