At an average of 375 days, timeline is better than 4.3 years reported under earlier laws
The average time taken for completion of corporate insolvency — where corporates get rescued through a resolution plan — at 375 days may still be above the legally stipulated timeline of 330 days.
In the 236 corporate insolvency cases wherein the companies concerned were rescued (as of March 31, 2020) through a resolution plan, the average time stood at 415 days, including the litigation time, the IBBI said. However, if the litigation time were to be excluded, the average time for completion of CIRP is 375 days. This is more than the 330 days mandated under the IBC post its amendment in 2019, including any extension of time as well as any exclusion of time on account of legal proceedings.
In the case of 932 companies sent for liquidation as of March 31, 2020, the average time period was 309 days. The Standing Committee on Finance headed by Jayant Sinha had recently highlighted that the main reasons for the delay in the insolvency resolution process are delays in admission of cases in the NCLT and delays in approval of resolution plans by the tribunal. The Parliamentary Panel had also noted that 13,170 IBC cases pending with the NCLT involved about ₹9 lakh crore and that 71 per cent of these cases have been pending for more than 180 days. The committee expressed concern that the resolution period delays resulted in rapid value erosion, thereby reducing the realisation value.
Suharsh Sinha, Partner, AZB & Partners, said that though the timelines exceed the gold standard of 270/330 days, they are still a fraction of the time taken under the erstwhile SICA and winding up regimes. At little over a year for resolution, IBC is at par with global benchmarks for insolvency resolution such as those of Singapore and the US, he added.
Sushmita Gandhi, Partner, IndusLaw, said : “Considering that IBC is a young and evolving statute with its trajectory shifting with every amendment (six so far), the delay in timelines seems to be natural.”
Tahira Karanjawala, Principal Associate, Karanjawala & Co, said that adherence of timelines is expected to improve now that some of the ambiguity in the interpretation of the legislation has been cleared up.