Insolvency and Bankruptcy Code (IBC) has in one way or the other helped bring back ₹12 lakh crore into the system, its Chairman Ravi Mital said on Saturday. “This is what IBC has really achieved”, Mital said at the 8th National Summit on Insolvency & Bankruptcy Code, organised by Assocham.

He highlighted that the total settled amount in cases withdrawn under Sec 12A (provision that permits withdrawal of applications admitted under IBC) stood at about ₹9 lakh crore. “If we add to this ₹ 9 lakh crore to the ₹3 lakh crore brought through resolutions, then IBC has one way or the other helped bring ₹12 lakh crore back into system”, Mital said. 

CREDITOR DELAYS

Mital also said that IBBI is now in talks with banks to ensure that they file their cases early under IBC. “Creditors take 200-400 days for filing their application. Delay in filing applications would lead to loss of value of the asset. We are trying to address delays. We are In talks with banks and requesting them to file cases early”, he said.

Mital said that banks have been advised to take default certificates from Information Utility instead of filing voluminous documents to support evidence of defaults. This will reduce the time taken by banks to file applications, he added. “Even without amendments to the Act or regulations, if we change the way we work …then things can be done”, he said.

On average, IBC cases take over 600 days for approval of resolution or for the entire process to be brought to final closure. 

Mital noted that 35 per cent of the cases are related to the erstwhile SICA and the overall recovery rate of 32 per cent under IBC includes the performance on Sick Industrial Companies Act (SICA) cases. “If you exclude SICA cases, performance of IBC will improve both in recoveries and delays”, he added.

Under IBC, the entire process is to be completed within a period of 180 days from the date of admission and can be extended for a maximum of 90 days only if the Committee of Creditors decides so with a 75 per cent vote.

Reasons analysed

Mital said that IBBI has already analysed the reasons for delays at several levels. He noted that National Company Law Tribunal (NCLT) does take some time to admit, but not much delay is seen in submission of resolution. It does take time to approve the resolution, he added.

The IBBI Chairman highlighted that last year the NCLT had approved the maximum number of resolution plans i.e 180, which was the highest in any year. “One needs to commend the work of NCLT and not criticise them. In the last three months, NCLT has been approving more than 35 resolutions a month. This is commendable. If this speed can be maintained, perhaps it can lead to reduced delays”, he said.

Mital also highlighted the findings of the recent IIM Ahmedabad study that showed as to how market capitalisation of companies that had gone into resolution had jumped by six times post resolution. “Companies that get resolved are in good shape. I believe market capitalisation is a good indicator of how things are happening“, he said.

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