Over 65 Per Cent Of Ongoing Corporate Insolvency Cases Have Extended Beyond 270 Days: IBBI

According to the latest quarterly newsletter by the IBBI, 10 per cent of the cases have been in progress for durations ranging from 180 to 270 days as of June 30

Data from the Insolvency and Bankruptcy Board of India (IBBI) shows that as of June 30, 2023, over 65 per cent of the ongoing corporate insolvency resolution cases have extended beyond 270 days. In the previous quarter, the IBBI reported that 64 per cent of the ongoing corporate insolvency resolution cases had extended beyond 270 days. According to the latest quarterly newsletter by the IBBI, 10 per cent of the cases have been in progress for durations ranging from 180 to 270 days as of June 30. 

Additionally, 15 per cent of the resolutions have been ongoing for a period of 90 to 180 days and merely 10 per cent of the cases have seen a timeline of less than 90 days.

Originally positioned as a swift alternative to the often sluggish older mechanisms, the Insolvency and Bankruptcy Code (IBC) 2016 aimed to establish a time-bound framework. The primary concern lies in maintaining promptness to prevent further deterioration of a business's viability or the value of its assets. Initially, the IBC set a 180-day deadline for concluding the resolution process, allowing a potential extension of 90 days, according to a 2022 report by The Hindu. 

Subsequent amendments to the IBC extended the overall timeline for completion to 330 days, nearly a year. In 2018, when the timeline stood at 180 days plus a 90-day extension, the majority of cases—ranging from companies with liabilities under Rs 50 crore to those exceeding Rs 1000 crore—were resolved within 300 days. However, in the fiscal year 2022, cases involving companies indebted beyond Rs 1,000 crore took as long as 772 days to reach resolution. Experts note that the average duration required to resolve such cases has seen a rapid increase over the past five years, the report said. 

The prolonged timeline for resolving cases within the framework of the Insolvency and Bankruptcy Code has emerged as a significant worry for investors, prompting efforts to expedite these proceedings.

According to the latest IBBI data, as of June 2023, the count of ongoing corporate insolvency resolution cases stood at 2,073. During this period, a total of 6,815 cases were accepted for resolution, out of which 720 cases had received approval for resolution plans, while 2,120 cases had received liquidation orders. Further, data showed that between April and June 2023, 238 cases were newly admitted under the corporate insolvency resolution process, with 198 cases being successfully resolved.

Til June 30, 2023, creditors had managed to realise Rs 2.92 lakh crore through resolution process. When these corporate debtors initiated the Corporate Insolvency Resolution Process (CIRP), the estimated fair value of available assets was Rs 2.72 lakh crore, and the liquidation value was assessed at Rs 1.74 lakh crore. This was in contrast to the total claims amounting to Rs 9.23 lakh crore.

In relation to the fair value of assets, creditors experienced a haircut of about 16 per cent, and in relation to their admitted claims, the haircut was approximately 68 per cent. Notably, in cases of successful resolution, creditors saw a realisation of 31.82 per cent of their admitted claims, indicating a haircut of around 68 per cent.