Quickest way to get defaulters to pay up? The threat of insolvency

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Key Points

Creditors have withdrawn 26,518 insolvency cases involving defaults of as much as 9.33 lakh crore before their applications were admitted by the adjudicating authority since the Insolvency and Bankruptcy Code (IBC) came into force...

This suggests creditors have either recovered money from debtors or forced them to settle dues just by posing the IBC threat, experts said..

In absolute terms, the default amount involved in the withdrawn cases was almost three times the Rs 3.16 lakh crore realised through the resolution of a total of 808 insolvent firms under the IBC until September 2023...

Importantly, the cumulative default amount relating to withdrawn cases climbed by more than a half over the past one-and-a-half years or so from Rs 6.09 lakh crore until March 2022, pointing to the increased invocation of the IBC, according to the IBBI data..

"In all the withdrawn cases, it's possible that creditors may not have recovered the entire amount but the recovery could still be attractive enough for the creditors to consider settling the cases with the debtors without getting into the time-consuming resolution process," he said...

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