The resolution plans under the insolvency and bankruptcy code or IBC have yielded 200% of the liquidation value for creditors, highlighting the efficiency of IBC mechanism.
The resolution plans under the insolvency and bankruptcy code or IBC have yielded 200% of the liquidation value for creditors, highlighting the efficiency of IBC mechanism. The plans also helped to rescue the viable firms from bankruptcy, IBC Chairman M S Sahoo said.
The creditors are able to realize 45% of their claims under IBC, which takes on average 300 days compared with a recovery of 25% under the previous regime which took up to 5 years for resolution. With the enactment of IBC, tolerance for default has disappeared and now it has become an obligation to repay the loan unlike earlier when repayment was just an option, Sahoo said at an event in Hong Kong.
A stakeholder may initiate CIRP( corporate insolvency resolution process) to recover its dues from the firm which failed to repay its debt for the first time. If the resolution process is initiated, the code shifts control from the debtor to creditors for resolution of insolvency cases, Sahoo said while further adding that through the process of resolution, the ownership often shifts to third parties.
While acknowledging the support of Judiciary, Government and the Regulators in facilitating the implementation of the Code, Sahoo said the stock market regulator SEBI has exempted acquisitions under resolution plans from making public offers under the takeover code and Reserve Bank of India has allowed external commercial borrowing for resolution applicants to repay domestic term loans. He further added that competition commission of India has devised a special route for speedy approvals for combinations envisaged under resolution plans.
According to the IBBI data, since December 2016, when the provisions of corporate insolvency resolution process or CIRP came into force, about 1800 corporate debtors have been admitted into it by the end of March 2019. Of these, 152 have been closed on appeal or review or settled; 91 have been withdrawn; 378 have ended in liquidation and 94 have ended in approval of resolution plans.