Speaking at the seventh annual day event of the Insolvency and Bankruptcy Board of India (IBBI), its chairman Ravi Mittal said the sales of these firms also jumped by 75% after resolution, stressing that the sick companies are doing very well following their resolution.
“This is a very big contribution of the IBC and this has led to growth in the economy,” Mittal said. The study was commissioned by the regulator to gauge the efficacy of the IBC regime.
Mittal said a record 185 cases have been resolved via the IBC in the last fiscal year. Until August, 135 cases have been resolved and going by this trend, 300 cases could see resolution this fiscal year.
More than Rs 51,000 crore has been realised from the resolution of cases under the IBC in FY23, which was higher than what creditors realised by tapping all other channels, including the SARFAESI Act, Debt Recovery Tribunal and Lok Adalats, Mittal said. He also stressed that the much-hyped delay in the resolution via IBC is still way lower than the time consumed to recover dues through other traditional channels.
The adjudicating authority is now clearing the cases expeditiously, Mittal said, calling on insolvency professionals to rise up to the occasion and help cut delay in resolving stressed assets fast.Mittal also highlighted the direct and indirect effects of the IBC regime. It directly facilitated the recovery of more than Rs 3 lakh crore through the resolution of various cases. Indirectly, it has led to a decline in the bad loans in the banking system, which stood at a decadal low of about 3.9% as of March 2023. The resolution proceeds have also enabled the creditors to lend more. It has also changed the debtor-creditor relationship by enforcing discipline among borrowers to pay up.The changed debtor-creditor relation has also resulted in the settlement of claims worth about Rs 9 lakh crore over the past seven years (where parties have withdrawn insolvency applications subsequently after settlement).
Insolvency system needs to be bolstered to resolve 1,000 cases a year: MCA secy
The insolvency eco-system needs to be equipped enough to handle the resolution of about 1,000 cases a year–more than three times of what is being expected to be resolved in FY24–to ensure it can withstand extra pressure even in an extra-ordinary business downturn, corporate affairs secretary Manoj Govil said at the IBBI event.
He hinted at a multi-pronged approach by authorities, which includes further strengthening of the adjudicating system and streamlining of various processes, to prepare the system to realise this objective.
Speaking on the sidelines of the event, the secretary said the government has sharply raised the member strength of the National Company Law Tribunal (NCLT) in recent months to 57 (including its president), much closer to the sanctioned strength of 63. More members are in the process of being appointed to erase the vacancies.
Going forward, various processes will be streamlined and improved upon, either by regulations or other steps, he indicated. Inter-ministerial consultations are going on to amend the Insolvency and Bankruptcy Code (IBC) further to cut delay in resolution.
