Insolvency and Bankruptcy Code (IBC) Chairman Ravi Mital said on Saturday that the law has somehow helped bring Rs 1,200 crore back into the system. “This is what the IBC has really achieved,” Mital said at the 8th National Insolvency and Bankruptcy Law Summit organized by Assocham.
He highlighted that the total settlement amount of cases withdrawn under Section 12A (the provision allowing withdrawal of applications entertained under the IBC) was about Rs 90 crore. “If we add Rs 900 crore to the Rs 300 crore proposed through the resolution, then the IBC can somehow help bring Rs 120 crore back into the system,” Mittal said.
Creditors delay
Mital also said that IBBI is currently in talks with banks to ensure that they file cases under the IBC at the earliest. “Creditors take 200-400 days to file applications. Delay in filing applications will result in loss of asset value. We are working hard to resolve the delay. We are in talks with banks and request them to file cases at the earliest,” he said.
Mittal said banks have been advised to obtain proof of default from information utility companies instead of submitting reams of documents to support proof of default. This will reduce the time it takes for banks to submit applications, he added. “Even if there are no changes to the Act or the regulations, if we change the way we work … then things can be done,” he said.
On average, IBC cases take more than 600 days to obtain resolution approval or for the entire process to be finalized.
Mital noted that 35% of the cases were related to erstwhile SICA and the overall recovery rate under the IBC was 32%, which included manifestations of Sick Industrial Companies Act (SICA) cases. “If SICA cases are excluded, IBC’s performance improves in terms of both recovery and delays,” he added.
According to the IBC, the entire process should be completed within 180 days from the date of approval and can be extended by a maximum of 90 days only by a 75% vote of the creditors committee.
Cause Analysis
Mittal said IBBI has analyzed the reasons for the delay at multiple levels. He noted that the National Company Law Tribunal (NCLT) did take some time to take cognizance but there was not much delay in filing the resolution. He added that approving the resolution would indeed take time.
The IBBI Chairman emphasized that the NCLT approved the maximum number of resolution plans, 180, last year, which was the highest ever. “One needs to praise the work of NCLT instead of criticizing them. In the last three months, NCLT has approved more than 35 resolutions every month. This is commendable. If this pace can be maintained, delays may be reduced,” he said.
Mittal also highlighted the findings of a recent IIM Ahmedabad study which showed that the market capitalization of companies that had gone into resolution jumped six times post-resolution. “The companies that are being resolved are in good shape. I believe market capitalization is a good indicator of how things are going,” he said.
