Creditors, mainly banks and financial institutions, have till end September 2022 realised ₹2.43 lakh crore through the resolution plans approved by National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC).

This is against the total claims of the creditors, amounting to ₹7.91 lakh crore and whose liquidation value is estimated at ₹1.37 lakh crore.

Put simply, creditors have realised 177.55 percent of the liquidation value, data available with IBBI and disclosed in the latest quarterly newsletter showed.

The haircut for creditors relative to the fair value of assets (an estimated ₹2.14 lakh-crore) was less than 16 per cent, while relative to their admitted claims is around 69 per cent. 

The data

The provisions relating to Corporate Insolvency Resolution Process (CIRP) came into force on December 1, 2016. A total of 5,893 CIRPs commenced by September end this year. Of these, as many as 3,946 have been closed. Of the CIRPs closed, the Corporate Debtor (CD) was rescued in 2,139 cases, of which 846 have been closed on appeal or review or settled; 740 have been withdrawn; and 553 cases have ended in approval of resolution plans; while 1,807 have ended in orders for liquidation.

About 35 per cent of the CIRPs (193 out of 547 for which data is available), which yielded resolution plans, were earlier with Board for Industrial and Financial Reconstruction (BIFR) and/or defunct. In these CDs, the claimants have realised 21.27% of their admitted claims and 169.56% of liquidation value.

Behavioural change

The IBC has led to behavioural change in the debtor-creditor relationship. The fear of losing control of the firm on initiation of CIRP is nudging debtors to settle their dues with the creditors as soon as possible. Till September this year, 23,417 applications for initiation of CIRPs having an underlying default of ₹7.31 lakh crore were resolved before their admission. This is attributed to the behavioural change effectuated by the Code.

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