Key Points
New Delhi: Corporate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), 2016, have been taking longer to complete and are yielding lower recovery rates for creditors who have lent money to these insolvent companies, an analysis of data by ThePrint has found...
However, experts on the matter say that the reason for this is less to do with the functioning of the IBC process, and more to do with the quality of the cases and the state of the economy...
There are broadly four ways that a case admitted for insolvency proceedings can be dealt with the borrowers and creditors reach a settlement under the IBC, the case is withdrawn, a resolution plan is agreed upon and the case is sent for liquidation...
The other reason why insolvency proceedings are taking so long is that many cases are legacy cases from the previous BIFR the body in charge of resolution processes before the IBC was implemented and several are now defunct...
The IBC seems to be incentivising debtors to settle their defaults even before the cases are admitted under the code, with over 27,500 applications for initiation of CIRPs (corporate insolvency resolution process) with an underlying default of Rs 9.74 lakh crore withdrawn before their admission, the CareEdge report said...
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