Creditors Recovered Rs3.58 Lakh Crore in 1,119 Liquidation Cases, No Info on Haircuts in Settlement: Govt

Moneylife Digital Team 11 February 2025

Personal Finance

Financial creditors have recovered Rs3.58 lakh crore through 1,119 cases under the liquidation process of the national company law tribunal (NCLT) since the implementation of the Insolvency and Bankruptcy Code (IBC) on 1 June 2016, the Union government informed the Rajya Sabha. However, the government does not maintain data on the amount waived or forgone in settlement cases, Harsh Malhotra, minister of state for corporate affairs, says.

According to information provided by the Insolvency and Bankruptcy Board of India (IBBI), the minister says a total of 2,707 cases have resulted in liquidation orders as of 31 December 2024. Out of these, final reports have been submitted for 1,274 cases in which creditors managed to realise Rs13,000 crore. Despite these recoveries, no official data is available on the amount of financial concessions granted as part of the settlement process, he added.

Randeep Singh Surjewala, a member of Parliament (MP), has asked about claims settled by NCLT and the total amounts recovered and waived or forgone during the settlements of cases since the inception of IBC in 2016.

While the government has details of the amounts recovered, Mr Malhotra clarified that it does not track figures related to the amount waived or forgone in these settlements. This lack of data raises concerns regarding transparency in the resolution process and the actual financial impact on creditors, particularly banks and financial institutions.

Responding to queries on whether a cap on haircuts (the reduction in the outstanding debt during resolution) has been considered, the minister stated that realisation under the IBC process is market-driven. "The resolution outcomes depend on the quality of assets at the time of resolution, and therefore, no fixed limits on debt write-offs have been imposed."

The ministry of corporate affairs (MCA) also confirmed that data on realisation by banks under the IBC process is not maintained, further emphasising the complexity and varying outcomes of each resolution case.

With rising concerns over large financial write-offs in corporate insolvency cases, stakeholders have called for greater transparency and accountability in the NCLT settlement process. The government's stance on leaving resolutions to market forces continues to be a point of debate, especially regarding the lack of a cap on the quantum of losses banks and financial institutions may have to absorb.

As the IBC framework continues to evolve, industry experts suggest that a more structured approach to tracking waivers and recoveries could enhance investor confidence and improve the efficiency of India's corporate insolvency resolution process (CIRP).

Comments

User

r_ashok41

4 weeks ago

is there a list of the companies covered

kalemohan

1 month ago

Why & how these responsible burrocrats neglect or forgot hair cuts?

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