State Bank of India (SBI) has proposed measuring the timelines of various segments within the Insolvency and Bankruptcy Code (IBC) process to pinpoint and address significant delays.
At an industry event focused on IBC, Ashwini Kumar Tewari, Managing Director, SBI, emphasised that while the legislation sets a 330-day overall outer time limit, tracking timelines across different stages is essential.
Currently, the average completion time for Corporate Insolvency Resolution Process (CIRP) under IBC stands at 630 days, drawing criticism for its delays. The IBC mandates a 180-day completion period for CIRP, extendable by up to 90 days, with a total outer limit of 330 days, beyond which the corporate debtor has to be driven into liquidation.
Tewari emphasised the need to measure timelines for key actions within the process, including Adjudicating Authority (AA) admission, Resolution Professional (RP) actions, Committee of Creditors (CoC) approvals, and AA resolution plan approvals.
By measuring these timelines, Tewari believes it will reveal where maximum delays occur, enabling targeted improvements. Additionally, he highlighted the importance of benchmarking recoveries against “enterprise value” alongside “liquidation value” to align with the code’s resolution objectives.
Tewari also underscored the need to assess the percentage of recovery achieved against the claims of creditors and not only the liquidation value as is the case now.
Meanwhile, a knowledge paper by PwC and Assocham showed that manufacturing, real estate, and construction sectors continue to dominate insolvency proceedings, accounting for 71 per cent of admitted CIRPs. These sectors also comprised 73 per cent of companies successfully devising revival plans and 67 per cent ordered for liquidation. Due to their complexity, tailored resolutions are being developed for these industries, with real estate potentially requiring a unique resolution process due to its distinctive characteristics, including homeowners as financial creditors under IBC.
The aim of the IBC — enacted in 2016– is to promote a dynamic and an effective insolvency resolution process, with an emphasis on revival rather than liquidation in the treatment of distressed companies and financial entities. IBC has been amended from time to time to safeguard the interest of various stakeholders.