NEW DELHI: During the December quarter, 195 companies were admitted to the various benches of the National Company Law Tribunal (NCLT) for bankruptcy resolution, bringing the total number of cases ending up in the courts for bailout to 4,946 up to now, according to an updated official from the Insolvency and Bankruptcy Board of India (IBBI).
The figures show that almost 200 bankruptcy cases are added to the courts, with around 50 closures each quarter, gradually increasing the load on the courts. The data also shows that while the number of liquidated cases is relatively high, these companies have very few assets while the cases that are rescued, although relatively fewer in number, have substantial assets, which are redeployed in the economy.
Of the total number of cases reaching the courts, 3,247 were closed in various ways, including liquidation, resolution and settlement or withdrawal at the end of December. Of all closed cases, in just over 14% a bankruptcy resolution plan was approved, while in about 47% of cases liquidation was ordered, the data showed.
At the end of December, 1,699 bankruptcy cases were continuing through the courts, 73% of which exceeded 270 days, the data showed. Most of the cases that have ended up in court and have also been closed, resolved or liquidated are in the manufacturing and real estate sectors, indicating the stress these industries are facing.
Data from the December quarter shows that under the Insolvency and Bankruptcy Code (IBC), 457 cases have been rescued so far, of which a third were in serious distress. The businesses rescued had assets of ₹1.5 trillion, while the 1,514 cases referred for liquidation had assets of only ₹55,000 crores when they were admitted. “So, in terms of value, 73% of distressed assets have been rescued,” IBBI said in the latest update. According to industry executives, companies with a strong asset base find it easier to attract investors and develop a turnaround plan under IBC.
Most bankruptcy cases are triggered by operational creditors such as vendors, while the rest are triggered by financial creditors and in some cases the company voluntarily enters the process. About half of the cases initiated by financial creditors end in liquidation, while only a small part of the cases initiated by operational creditors end in liquidation. According to the data, three out of four cases initiated by the failing company end in liquidation.
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