As much as 69 percent of the total cases under the Insolvency & Bankruptcy Law, or the IBC, have been closed by March 2023, data from the IBBI quarterly newsletter shows. Out of the 6,571 cases under the IBC since it’s inception, 4,515 cases have been closed. While 2030 of the corporate insolvencies, or 45 percent of the closed cases, are under liquidation, 55 percent comprise corporate debtors which have been rescued, either via settlement, appeal or resolution.

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When it comes to 'resolution plans' specifically, there were 678 cases by FY23-end. A total of 678 corporate insolvencies have been addressed through ‘resolution plans’ under the IBC in the last six-odd years since it’s inception, which is slightly over 10 percent of the total cases under the IBC and 27 percent of the cases closed till FY23-end.

Creditors, both financial and operational, filed claims worth Rs 8.99 lakh crore under these resolution plans but by the time the insolvency process was initiated , the ‘fair value‘ of assets had declined to Rs 2.65 lakh crore or lost 70 percent of the value, while the liquidation value was even lower at 19 percent of the original claim or Rs 1.70 lakh crore. Financial and operational creditors have realised Rs 2.86 lakh crore by FY23-end, taking a hair cut of 68 percent on the original value of their claims.

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As Uday Kotak, the CEO of Kotak Mahindra Bank, puts it, banks should be able to recover the money they lend otherwise it restricts their ability to take risks and impairs capacity building in the sector. “I think the concept of IBC was a great concept, it really was the basis of the creditor being in control, but I think there is work to be done. I think, we really need to fix the judicial system which is consistent with a bankruptcy law because at the end of the day if banks lend money we must be able to recover the money. If we have a problem there it constraints our ability to take better risk. “, Kotak told CNBC-TV18 last week.

However, the government has been consistently pointing towards the recovery rates against the ‘fair value ‘ of assets under IBC. In 586 of the 678 resolutions, creditors received over 83 percent of the fair value of the assets , thus implying the haircut was only 17 percent as against the 68 percent loss incurred against original claims.

However, in the last financial year , the extent of haircuts under the IBC seem to have come down. According to the IBBI data, of the Rs 1.42 lakh crore worth of claims admitted during FY23, slightly over Rs 51,000 crore or 36 percent was recovered under various resolution plans. Also, the number of resolutions at 180 in FY23, has been the highest so far under the IBC.

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First Published:May 16, 2023 9:06 AM IST