Clipped from: https://www.thehindubusinessline.com
Liquidation ordered in 57% of cases, says Motilal Oswal report card on 3 years of IBC
Financial and operational creditors have managed to recover money in just 221 cases, or 14 per cent, of the 1,604 cases resolved by the National Company Law Tribunal (NCLT) till March-end.
In the three years ended March 31, there were about 2,170 cases pending before various Benches of the NCLT, taking the overall cases admitted for resolution to 3,774. The NCLT ordered liquidation in 914 cases (57 per cent) while 312 cases (19 per cent) went on appeal and about 157 litigations (10 per cent) were withdrawn, said Motilal Oswal Research’s three-year report card on the Insolvency and Bankruptcy Code (IBC).
Interestingly, of the 914 cases where liquidation was ordered, the final report was submitted for just 69.
The recovery of loans under IBC drops to 25 per cent from 44 per cent, if one excludes the initial list of 12 large defaulters referred by the RBI, in 2017. Of the 12 large companies that defaulted, Electrosteel Steels, Bhushan Steel, Essar Steel, Alok Industries, Jyoti Structure and JP Infratech were resolved while Bhushan Power is awaiting the final verdict of the Supreme Court.
As of March-end, the average time taken for the resolution of cases stood at 410 days (including the days spent under litigation). This is longer than the prescribed 270-day timeframe. The average time taken for the 914 liquidation orders announced to date is 309 days.
Among the public sector banks, State Bank of India, Bank of Baroda and Bank of India will be the key beneficiaries of default resolution, while ICICI Bank will gain the most among the private sector banks, said the Motilal Oswal report.
The pace of resolution will slow down further with the outbreak of the pandemic, it predicted.
The government has announced several amendments to IBC as part of the economic relief package for Covid-ravaged India Inc. It has increased the threshold for IBC cases to ₹1 crore from ₹10 lakh and suspended all new insolvency proceedings for one year. Lenders have been instructed to keep all Covid-related debt out of the definition of default.
Earlier, the resolution timeline was extended to 270 from 180 days to ease the additional provisioning requirement for banks.