New Delhi, September 5: The number of corporate insolvency resolution processes (CIRPs) admitted by the National Company Law Tribunal (NCLT) dropped by a massive 83% during the April-June quarter on a sequential basis.
While 435 cases were admitted in the final quarter of the last fiscal, only 76 cases were admitted during the first quarter of the current fiscal, according to data from the Insolvency and Bankruptcy Board of India (IBBI).
The drop was largely due to the ordinance suspending initiation of CIRP from March 25 onward, to protect companies from the impact of the pandemic and ensuing lockdown, The Economic Times reported.
During the June quarter, 12 CIRPs ended in the approval of resolution plans while 24 resulted in the liquidation of the corporate debtor.
In comparison, the NCLT admitted 301 CIRPs in the first quarter of FY20, during which 26 cases saw the approval of a resolution plan while 96 were closed after liquidation.
With the addition of the latest data, the total insolvency cases admitted under the Insolvency and Bankruptcy Code (IBC) stood at 3,911 since it came into effect in December 2016.
From the 1,803 cases that were closed, 250 (13.86%) cases ended in the approval of a resolution plan and 955 (52.96%) resulted in liquidation. The remaining were either withdrawn or closed through appeal or review or settled.
“However, it is important to note that 72.48% of the CIRPs ending in liquidation (690 out of the 952 for which data is available) were earlier with BIFR (Board for Industrial and Financial Reconstruction)/ or defunct,” the IBBI said, adding that the economic value of most of these companies had already eroded before they were admitted into CIRP.
The average time taken for completion of the 250 cases ending in approved resolution plans was 423 days which came down to 380 days excluding the time excluded from the CIRP by the adjudicating authority. The time taken for the 955 cases yielding liquidation orders was 312 days.
In terms of value, creditors’ claims amounted to Rs 4.71 lakh crore in the 250 cases yielding approved resolution plans. While these debtors had assets with a realisable value of Rs 1.03 lakh crore, creditors recovered Rs 1.96 lakh crore.
While the recovered amount was 191% of the realisable value, creditors received 45% of their total claims, which was the highest among all recovery options available to them, the IBBI said.
On the other hand, from the 952 cases ending in resolution for which data was available, realisable value stood at Rs 38,000 crore compared to aggregate claims of Rs 5.3 lakh crore.
It is pertinent to note that the IBC has resulted in thousands of viable companies resolving their debt before completion of the CIRP.
“They are resolving when default is imminent, on receipt of a notice for repayment but before filing an application, after filing an application but before its admission, and even after admission of the application, and making best effort to avoid consequences of resolution process,” the IBBI said.