Bankruptcy recoveries on the rise

New Delhi, May 13, 2023

Creditors, including banks, have seen realisation in bankruptcy resolution cases rise to 36% of the admitted claims during 2022-23, compared to 23% in the previous year, despite a sharp rise in the number of cases filed for insolvency resolution.

Latest data released by the Insolvency and Bankruptcy Board of India showed that 1,255 corporate insolvency actions were initiated last year, a 41% increase over the 887 cases filed in NCLT in the previous year.

With 650 cases filed by financial creditors, it was the first time that action initiated by this segment crossed the 50% mark since insolvency action began in 2016-17. Ever since the law was implemented over half the cases in every fiscal were filed by operational creditors, including vendorsand statutory agencies.

While 80% of the cases filed by financial creditors had defaults of over Rs 10 crore, almost the same proportion of operational creditors, mainly vendors, trigger action in case of defaults of under Rs 1 crore. Amajority of the cases filed by operational creditors — 53% or 3,265 of the 6,567 actions initiated — were closed due to appeal, review or withdrawal, indicating that they were “settled”.

Separate data put together by the regulator showed that 38% of the 847 cases were withdrawn as the company, which faced insolvency action opted for full settlement with the applicant. Over a quarter of these cases were withdrawn citing “other settlements” with the creditors.

[The Times of India]