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IBC resolutions delayed, but still a blessing

The average time taken for completion of corporate insolvency - where corporates get rescued through a resolution plan - at 375 days may still be above the legally stipulated timeline of 330 days.

However, this performance is noteworthy compared with the situation five years back where insolvency resolution took about 4.3 years on an average, say insolvency experts. This is a good outcome given that the Insolvency and Bankruptcy Code (IBC) is a nascent law and has brought positive results like improvement in the Ease of Doing Business ranking, they added.

The time taken for completion of corporate insolvency whether for resolution or liquidation has been revealed in the IBBI's latest annual report (2019-20). Time is of essence in insolvency resolution proceedings so that the value of the assets of the corporate concerned could be preserved.

In the 236 corporate insolvency cases wherein the companies concerned were rescued (as of March 31, 2020) through a resolution plan, the average time stood at 415 days, including the litigation time, the IBBI said. However, if the litigation time were to be excluded, the average time for completion of CIRP is 375 days. This is more than the 330 days mandated under the IBC post its amendment in 2019, including any extension of time as well as any exclusion of time on account of legal proceedings.

In the case of 932 companies sent for liquidation as of 31 March 2020, the average time period was 309 days. The Standing Committee on Finance headed by Jayant Sinha had recently highlighted that the main reasons for the delay in the insolvency resolution process (CIRP) are delays in admission of cases in the NCLT and delays in approval of resolution plans by the tribunal. The Parliamentary Panel had also noted that 13,170 IBC cases pending with the NCLT involved about Rs. 9 lakh crore and that 71 per cent of these cases have been pending for more than 180 days. The committee expressed concern that the resolution period delays resulted in rapid value erosion, thereby reducing the realisation value.

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