India Bankruptcy Law Helps Creditors Recover $29.43 Bln, IBBI Says

India’s Insolvency & Bankruptcy Code (IBC) helped creditors recover a total of 2.43 lakh crore rupees ($29.43 billion) as of September 2022 through the corporate insolvency resolution process (CIRP) since the inception of the bankruptcy law in December 2016.

The provisions related to the CIRP came into force on 1 December 2016 and a total of 5,893 companies were admitted for the insolvency resolution by the end of September 2022, according to a quarterly report by the Insolvency & Bankruptcy Board of India (IBBI). Of these, 3,946 cases have been closed, it said.

Of the CIRPs closed, the corporate debtor was rescued in 2,139 cases, of which 846 cases were closed on appeal or review or settled, the insolvency regulator said. It added that 740 cases were withdrawn and 553 cases ended in approval of resolution plans, while 1,807 cases ended in orders for liquidation.

Resolution of 12 large accounts were initiated by banks, as directed by the Reserve Bank of India, the regulator said, adding that they had an aggregate outstanding claim of 3.45 lakh crore rupees as against liquidation value of 73,220 crore rupees.

Of these, resolution plan in respect of eight corporate debtors – Jyoti Structures Ltd., Essar Steel India Ltd., Bhushan Steel Ltd., Bhushan Power & Steel Ltd., Electrosteel Steels Ltd., Amtek Auto Ltd., Monnet Ispat & Energy Ltd. and Alok Industries Ltd. – were approved and orders for liquidations were issued in respect of two companies, the IBBI said.

The CIRPs for two corporate debtors and liquidation of two companies are ongoing and are at different stages of the process, it noted.

The IBBI said the fair value of the assets available with the corporate debtors, when they entered the CIRP was estimated at 2.14 lakh crore rupees and their liquidation value was at 1.37 lakh crore rupees, compared with the creditors total claims of 7.91 lakh crore rupees.

The creditors have realized 177.55% of the liquidation value and 84% of the fair value (based on 456 cases where fair value have been estimated), it added.

The haircut for creditors relative to the fair value of assets was less than 16%, while it was around 69% relative to their admitted claims, the regulator said, noting that the realizable value does not include the CIRP cost, and several probable future realizations such as equity, realization from corporate and personal guarantees, as well as recovery from avoidance applications.

The IBBI’s July-September 2022 report said about 35% of the CIRPs (193 out of 547 for which data are available), which yielded resolution plans, were earlier with the Board for Industrial and Financial Reconstruction (BIFR) and/or defunct. In these corporate debtors, the claimants realized 21.27% of their admitted claims and 169.56% of liquidation value, it noted.

(Note: 1$ = 82.5600 Indian rupees)