Nearly half of the 3,247 insolvency cases have been resolved through liquidation, and only 457 or 14% of them through the sale of assets in accordance with their lender-approved resolution plans, according to a report released Friday. .
Even the various resolution processes have seen debt recovery of only 31% on average, according to data from the Insolvency & Bankruptcy Board of India.
Data that covers all cases from the implementation of the Insolvency and Bankruptcy Code (IBC) five years ago until December 2021 reflects the very slow pace of the process, according to an analysis by Icra Ratings .
Liquidation means that lenders or finance companies face the maximum weight of losses on their books.
Of the claims of Rs 7.52 lakh crore made by creditors on their borrowers, lenders were only able to realize Rs 2.5 lakh crore, reflecting the liquidation pains lenders were forced to endure, said Icra Ratings in its analysis.
While various NCLTs (National Company Law Tribunals) have admitted 4,946 bankruptcy cases through December 2021, over 10,000 applications are still pending admission or rejection.
According to the agency, NCLTs have so far closed 3,247 applications while 1,699 are still pending.
No less than 47% or 1,514 cases out of a total of 3,247 cases resolved by liquidations, only 14% or 457 applications were closed in accordance with the appropriate resolution plans approved by the lenders. According to the analysis, 22% of total resolutions are still pending review/appeal and 17% of total cases admitted have been withdrawn so far.
According to the analysis, one of the main reasons for the relatively lower achievement is that as many as 77% of cases either fall under the Board for Industrial and Financial Reconstruction (BIFR) or are not operational when admitted. , indicating that even after five years of implementation, the IBC is still handicapped because the government has not removed BIFRs and DRTs.
In addition, more than 50 percent of admitted cases were submitted by operational creditors, demonstrating their role under the code.
About the delay in the resolution process, the agency said that compared to the mandatory 90 days to close a case after admission, 73% of cases were completed well after 270 days. While 16% of cases took 90-270 days, only 11% of cases were closed within the stipulated 90-day time frame.
A total of 69 cases took 90 to 180 days to be processed, 75 cases took 180 to 270 days, 154 requests took 270 days to one year, 278 were processed between one and two years. As many as 569 cases took over two years to complete the process.
The delayed resolutions, according to the agency, were largely due to legal entanglements and understaffed/overloaded NCLT benches.
Only 20% of the cases referred for liquidation have been settled, and nearly half of the 80% of ongoing cases have taken more than two years to be liquidated.
About who dragged the defaulter to insolvency court, according to the report, 51% of claims were filed by operational creditors, 43% by financial creditors and 6% by corporate debtors.
Sector-wise, companies in the manufacturing sector topped the list of bankruptcy filings with 40% of total files, followed by real estate companies (20%), construction and others (11% each), retail (10 percent), transport and electricity (3 percent each) and hotels (2 percent).
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