According to ratings agency ICRA, timely completion of Corporate Insolvency Resolution Process (CIRP) initiated under the Insolvency and Bankruptcy Code (IBC) continues to remain a challenge. Of the 2,542 cases admitted under IBC till date, 1,497 CIRPs or 59% of total admitted cases are still on-going in the courts. Among the CIRPs that have been closed, only 15% CIRPs have yielded a...
According to ratings agency ICRA, timely completion of Corporate Insolvency Resolution Process (CIRP) initiated under the Insolvency and Bankruptcy Code (IBC) continues to remain a challenge. Of the 2,542 cases admitted under IBC till date, 1,497 CIRPs or 59% of total admitted cases are still on-going in the courts. Among the CIRPs that have been closed, only 15% CIRPs have yielded a resolution plan whereas 56% of the cases ended up going for liquidation.
The on-going resolutions are rising as the number of cases being referred to the National Company Law Tribunal (NCLT) remains high, according to an ICRA study. While the infrastructure challenges for closing CIRPs-corporate insolvency resolution process - in a timely manner continue, if the NCLT infrastructure is not further strengthened, it is expected that the increasing trend of ongoing CIRPs shall continue over the near term.
Bhushan Power Steel Limited (‘BPSL’) accounted for realization of Rs. 19,350 crore. However, since the entity is undergoing litigation at the National Company Law Appellate Tribunal (NCLAT), there is no visibility in terms of recovery of the amount to the financial creditors according to ICRA. Similar litigations are hampering the recovery process for the creditors of Essar Steel India Limited where NCLT had approved the resolution plan few months back. Till date, of the 12 largest gross non-performing assets identified by the Reserve Bank of India in June 2017, only four cases have yielded a successful closure of resolution while the others are still under CIRP or facing litigations or have been ordered for liquidation.
According to Sankha Subhra Banerjee, Assistant Vice President, ICRA, most of the large cases face significant delays in approval of resolution plan and/or subsequently during the implementation of the plans, resulting in huge delays in actual recovery of money by the creditors, due to constant litigations by various parties in higher courts.
Given the recent amendment of the CIRP timeline to 330 days from 270 days, it would be beneficial if all the relevant parties put in their best efforts to adhere to the timelines to ensure the IBC’s success.