There have been four deaths for every revival case under the Insolvency and Bankruptcy Code (IBC) proceedings.

And significantly for those four, which have headed for liquidation, the process continues without much progress and hardly any takers.

Further, of the 1,858 cases taken up for resolution and finding a suitor for a revival plan, more than 1,000 are still under various stages of proceedings at the National Company Law Tribunal (NCLT).

As on March 31, 2019, of the total 1,858 cases admitted under insolvency proceedings, 94 achieved resolution, 243 were settled by mutual consent or appeals, and 378 companies/cases were taken up for liquidation. And, the rest are still undergoing the corporate insolvency resolution process (CIRP).

The enactment of the Insolvency and Bankruptcy Code, 2016, was aimed at addressing the problems of sick units in a time-bound manner by re-organising and achieving a resolution.

While the law came as a ray of hope and helped resolve a number of cases, particularly in the steel sector, the same cannot be said about the power sector. Most players in the power sector are struck without resolution during the case time, and even after resolution those headed for liquidation are in doldrums.

For the bleeding companies and non-performing assets, the Code was a way out of the mess looming large over them due to the piled-up debt and the banking sector being saddled with bad books.

Lokesh Vasudevan, Partner at Brahmayya & Co, said, “The Code is a beneficial legislation which should have put the corporate debtor back on its feet and not be treated as a mere recovery legislation for creditors. Recovery in case of resolution is fixed and unchangeable, whereas, realisations out of liquidation are uncertain, time-consuming and stressful.”

The alarming aspect of the insolvency process has been that the livelihoods of thousands of employees and businessmen and suppliers who were dependant on these companies have uncertainty staring at them as the future is not clear.

And when they head for liquidation, the situation is even worse — so when an asset could not be revived as a ‘going concern’ during the process, who will respond to a piecemeal sale of liquidated assets is a larger question.

Vasudevan said the spirit of the law is to keep the entity a ‘going concern’. However, in most cases, the operations have come to a halt, without cash flows and an uncertain future.

For the banking sector, which has been drawing flak for the mounting debt in their books, they need to respect the intent of the IBC to find a resolution in the interest of the company and the economy.

In some cases which have been resolved, the amount that has actually come through as settlement towards revival is a pittance. However, the best part is the company will continue its operations. And, in cases where there is no revival plan and the company is headed for liquidation, it is even worse as it would be tougher to find a suitor.

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