The National Company Law Tribunal (NCLT) achieved a record number of approvals for resolution plans under the Insolvency and Bankruptcy Code (IBC) in the financial year 2023-24 (FY24). According to an analysis by ICRA, the NCLT approved 269 resolution plans, a significant increase from the previous high of 189 plans in FY23. This notable rise in approvals is attributed to the...
The National Company Law Tribunal (NCLT) achieved a record number of approvals for resolution plans under the Insolvency and Bankruptcy Code (IBC) in the financial year 2023-24 (FY24). According to an analysis by ICRA, the NCLT approved 269 resolution plans, a significant increase from the previous high of 189 plans in FY23. This notable rise in approvals is attributed to the surge in corporate debtors admitted under the IBC in FY23, largely influenced by the economic impacts of the Covid-19 pandemic.
In FY24, the approved resolution plans resolved creditor claims amounting to ₹1.7 lakh crore, up from ₹1.5 lakh crore in FY23. Despite this increase in resolved claims, the average recoveries for creditors remain modest, with ICRA projecting a recovery rate of 30-35% of claims in FY25. The haircuts, which represent the losses creditors incur relative to their total claims, remain steep at 73%, up from 64% in FY23.
One of the pressing concerns identified by ICRA is the prolonged duration of the Corporate Insolvency Resolution Process (CIRP). The average time taken to close a CIRP that yields a resolution plan increased to 843 days in FY24 from 831 days in FY23. This extended duration often leads to a significant erosion of the debtor's assets.
The number of CIRPs resulting in liquidation remains high. In FY24, the NCLT issued liquidation orders for 446 corporate debtors, up from 400 in FY23. Since the inception of the IBC, around 45% of the 5,467 closed CIRPs have ended in liquidation, while only 17% have yielded a resolution plan. The remaining cases were withdrawn post-NCLT admission.
Liquidation often results in minimal recovery for creditors. As of March 2024, liquidations for 960 corporate debtors had been completed, with creditors realizing a mere 4% of their total admitted claims.