How Much Creditors Recovered Via Insolvency Resolution?

India’s bankruptcy law, which came into force in December 2016, has helped creditors recover 3.16 lakh crore rupees ($38 billion) under corporate debtors’ insolvency resolution plans as of 30 September 2023.

The fair value and liquidation value of the assets available with these corporate debtors, when they entered corporate insolvency resolution process (CIRP), was estimated at 2.92 lakh crore rupees and 1.87 lakh crore rupees, respectively, the Insolvency & Bankruptcy Board of India (IBBI) said in its latest quarterly report.

This is against creditors’ total claims of around 9.92 lakh crore rupees, it added.

The insolvency regulator said the creditors have realized 168.5% of the liquidation value and 86.3% of the fair value, based on 713 cases where fair value was estimated. The haircut for creditors relative to the fair value of assets and their admitted claims was around 14%, and 68%, respectively, it noted.

The realization does not include the CIRP cost, and several probable future realizations.

The IBBI said the provisions related to the CIRP of Insolvency & Bankruptcy Code (IBC) became effective on 1 December 2016 and a total of 7,058 CIRP cases were admitted by the end of September 2023. Of these, 1,053 cases were closed on appeal or review or settled.

Sector wise, manufacturing topped the admission list of CIRPs with 38% share, followed by real estate at 21%, construction at 12% and wholesale & retail trade at 10%, the report showed.

Liquidation & Withdrawals

The IBBI said 2,120 CIRPs had yielded orders for liquidation until June 2023, of which the final orders were submitted in 555 cases.

During the July-September 2023 quarter, 11 more CIRPs were reported as yielding orders for liquidation, pertaining to the prior period, it added, noting that 118 CIRPs ended in orders for liquidation during the quarter.

Two corporate debtors, which had earlier yielded order of liquidation, have since either been ordered to be restarted or have been withdrawn, taking the total CIRPs ending in liquidation to 2,249, according to the IBBI. Of these, final reports have been submitted in 597 cases, it said.

The regulator said there were 1,652 ongoing liquidation process as on 30 September 2023, up from 1,565 cases three months earlier.

The IBBI said that a total of 947 CIRPs were withdrawn under section 12A of the IBC until September 2023. The reasons for withdrawal included full settlement with the applicant and other creditors, as well as agreement to settle in future and other settlement with creditors.

Individual Insolvency Resolution

The regulator said the provisions regarding the insolvency resolution and bankruptcy related to personal guarantors (PGs) to corporate debtors came into force on 1 December 2019.

A total of 2,289 applications have been filed until 30 September 2023 for initiation of personal insolvency resolution process of PGs. Out of these, 284 applications have been filed by the debtors and 2,005 applications by the creditors under sections 94 and 95 of the IBC, respectively.

Of the 2,289 applications, 88 applications were withdrawn/rejected/dismissed before the appointment of resolution professionals (RPs), while RPs were appointed in 991 cases.

Following the appointment of RPs, 62 cases were withdrawn/rejected/dismissed and 282 cases were admitted.

(Note: $1 = 83.2688 Indian rupees)

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