Asserting that recovery through the insolvency law process has been pretty good, IBBI chief MS Sahoo said that creditors have recovered ₹1.6-lakh crore, which is 207 per cent of the realisable value of assets of the 190 companies rescued till December last year.

Time-bound resolution

The Insolvency and Bankruptcy Code (IBC), which came into effect in 2016, provides for a time-bound and market-linked resolution of stressed assets. In case the resolution does not happen, the company concerned goes for liquidation.

Sahoo, Chairperson of the Insolvency and Bankruptcy Board of India (IBBI), said incidental recovery has been pretty good under the code. “190 companies have been rescued till December 2019 through resolution plans. They owed ₹3.8-lakh crore to creditors.

“However, the realisable value of the assets available with them when they entered the IBC process was only ₹0.77-lakh crore. Thus, the amount the companies owed to creditors was not backed by assets on the ground,” he said.

Noting that the code maximises the value of the assets on ground and not of the assets that do not exist, Sahoo said creditors recovered ₹1.6-lakh crore, which is 207 per cent of the realisable value of assets of the companies.

When asked if the success of the IBC is not just in numbers, Sahoo said that given the behavioural change, the performance should be seen in totality. It should be seen in terms of “what happens under the IBC, what happens on account of the IBC, and what happens in the shadow of the IBC”, he said.

So far, around 3,600 companies have been admitted for resolution under the IBC. Out of them, 200 have been resolved through resolution plans and 800 have gone for liquidation. Around 150 applications have been withdrawn.

A company is taken up for resolution under the IBC after approval from the National Company Law Tribunal (NCLT). “When compared to other options, recovery through the IBC process has been better,” said Sahoo.

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