Record Number of Companies Saved by Insolvency Code in 2024
In fiscal 2024, the Insolvency and Bankruptcy Code (IBC) recorded its highest-ever number of resolutions, with 269 cases approved by the National Company Law Tribunal (NCLT). This marks a 42% increase from the 189 cases resolved in fiscal 2023, according to a report by CRISIL.
Approximately 88% of these cases were from previous years’ backlogs. The increase in resolutions was driven by greater investor interest in turning around stressed assets and the appointment of new NCLT members.
However, the report noted a moderation in recovery rates and extended timelines. Recovery rates dropped to 27% of admitted claims, down from 36% in fiscal 2023, and resolution timelines extended to 850 days from 825 days the previous year.
Real estate and manufacturing sectors contributed to around 65% of the total plans approved for fiscal 2024. The real estate sector saw a 200% increase in resolutions due to strong demand for residential properties, while the manufacturing sector focused on mid-sized and small companies.
Despite improvements, delays in case admissions and lack of a common mediation platform for promoters and lenders remain challenges. The Insolvency and Bankruptcy Board of India (IBBI) is considering introducing formal out-of-court solutions like Insolvency Mediation to address these issues.
“Delay in resolution not only impairs the asset value but also reduces the chance of its revival,” said Sushant Sarode, Director, CRISIL Ratings.
Doubts Revealed
Insolvency Code -: The Insolvency and Bankruptcy Code (IBC) is a law in India that helps companies that are in financial trouble to either close down or get help to pay their debts.
Fiscal 2024 -: Fiscal 2024 refers to the financial year 2024, which is a period used for accounting and budget purposes. In India, it usually starts on April 1, 2023, and ends on March 31, 2024.
NCLT -: NCLT stands for National Company Law Tribunal. It is a special court in India that deals with company-related cases, including those under the Insolvency and Bankruptcy Code.
IBBI -: IBBI stands for Insolvency and Bankruptcy Board of India. It is a government body that oversees the implementation of the Insolvency and Bankruptcy Code.
Recovery rates -: Recovery rates refer to the percentage of money that creditors get back from a company that is going through insolvency. In this case, it dropped to 27%, meaning creditors got back 27% of what they were owed.
Timelines extended to 850 days -: This means that the time taken to resolve insolvency cases has increased to 850 days, which is more than two years.
Real estate sector -: The real estate sector includes businesses that deal with buying, selling, and developing land and buildings.
Manufacturing sector -: The manufacturing sector includes businesses that produce goods in factories, like cars, clothes, and electronics.
Mediation platforms -: Mediation platforms are systems or services that help people or companies resolve disputes without going to court.
Out-of-court solutions -: Out-of-court solutions are ways to solve legal problems without having to go through a formal court process.