News Brief
The IBC 'Resolution' Effect: Promoters Settle Rs 10 Lakh Crore In Defaults To Avoid NCLT Proceedings
Insolvency and Bankruptcy Code.
Since its inception over seven years ago, the Insolvency & Bankruptcy Code (IBC) has reshaped the landscape of corporate debt resolution in India.
Under IBC, 27,514 cases were settled before admission in the National Company Law Tribunal (NCLT), and 891 cases of defaults involving bank loans worth Rs 10 lakh crore resolved till December 2023.
The resolution of these cases has led to the recovery of Rs 3.2 lakh crore, accounting for 32 per cent of the total admitted claims by banks and financial institutions, reported The New Indian Express.
Under IBC, resolution means acquisition of an insolvent company by another as a going concern. In case when, the resolution process fails to find a buyer for the company it is liquidated where assets of the company are sold to recover money by the creditors.
However, during the same period, 2,376 defaulting companies were ordered to be liquidated under the IBC framework.
Also, the recent quarterly report by the Insolvency and Bankruptcy Board of India (IBBI) sheds light on the progress made in resolving corporate insolvency cases.
"Thousands of debtors are resolving distress in early stages. They are resolving when default is imminent, on receipt of a notice for repayment but before filing an application, after filing an application but before its admission, and even after the admission of the application, and making best effort to avoid consequences of a resolution process," IBBI said, while releasing the numbers for the Dec quarter.
In the December quarter alone, 79 cases were resolved, with creditors recovering 26 per cent of the total admitted claims.
These cases involved defaults amounting to Rs 16,517 crore, with lenders managing to recover Rs 4,300 crore.
Significantly, notable cases such as Mittal Corp and AMW Autocomponent were successfully resolved during this period.
Mittal Corp, with a default of Rs 1,767 crore, was acquired by Shyam Sel and Power Limited, offering Rs 350 crore to the creditors.
