IBC: NCLT approved record resolutions, more than doubled in September quarter

The processing capacity of insolvency cases under the Insolvency and Bankruptcy Code (IBC) is now seeing a significant ramp up with the National Company Law Tribunal (NCLT) approving a record 85 corporate insolvency cases in the just ended July-September 2023 quarter, latest IBBI data showed.

This was more than double the 38 corporate insolvency resolutions approved by the NCLT in the April-June 2023 quarter. 

Going by the September quarter run rate, NCLT is well on course to process the IBBI indicated level of 300 resolutions this fiscal year, say insolvency law experts.

In the July-September 2023 quarter, the total value of claims admitted touched ₹65,247 crore, of which the total realisable value stood at ₹20,771 crore, IBBI data showed.

For the September 2023 quarter, the realisable value as a percentage of liquidation value stood at 219 per cent (much above the 168 per cent levels since commencement of IBC). It was 133 per cent of the fair value of assets resolved, much higher than the overall average of 86 per cent since the commencement of IBC.

• Also read: Govt makes inter-state shifting of registered offices post IBC resolution easier

On the other hand, in the April-June 2023 quarter, the total value of claims admitted in the 38 cases stood at ₹23,046 crore, of which the realisable value was ₹6,791 crore. Realisable value as a percentage of liquidation value stood at 141.30 per cent for the June 2023 quarter and 97 per cent as percentage of fair value.

This improvement in NCLT processing of insolvency cases comes at a time when the Corporate Affairs Secretary Manoj Govil had recently underscored the need for a significant ramp up in the processing capacity of insolvency cases under IBC. Govil had then noted that a large gap still exists between the demand on the system and the current NCLT processing capacity.

IBBI Chairperson Ravi Mital had also at the recent foundation day event of IBBI noted that NCLT is all set to approve a record 300 resolutions this fiscal year as compared to average run rate of about 100 resolutions a year. He had urged insolvency professionals to increase their speed for faster resolutions.

About 5,000 new cases are filed with NCLT every financial year. Govil had underscored the need to build capacity at NCLT to handle atleast 1500 cases every year.

Currently, NCLT has 57 working members out of the sanctioned limit of 63 including the NCLT President. The Government has no immediate plans to increase the number of NCLT Benches.

• Also read: IBBI proposes new measures to improve corporate insolvency process efficiency

EXPERTS’ TAKE

 Hari Hara Mishra, CEO, ARC Association, said that September 2023 quarter has probably been the best quarter since inception of IBC with 85 cases  resolved in a  single quarter. 

This assumes added  importance with substantial  amount recovered   in respect of these resolutions with  creditors realising 133 per cent of Fair Value, compared to  a historical average of 86 per cent of Fair Value in respect of all resolved cases  so far, he added. “A resolution a day. will keep IBC cynics at bay”, Mishra said.

Rohan Batra, Partner, Anagram Partners, a law firm, said this September 2023 quarter performance was a positive development in the insolvency resolution landscape.

Compared to the previous quarter, the period from July to September 2023 witnessed nearly double the growth, with 85 Corporate Insolvency Resolution Processes (CIRPs) yielding approved resolution plans, he said. “This serves as a positive indicator of the improved efficiency and effectiveness of the insolvency resolution framework”, Batra said.