The National Company Law Tribunal (NCLT) has given its approval to 180 resolution plans during the financial year 2023 (FY23), marking the highest number of approvals in a single year. This has resulted in a total realization of Rs 51,424 crore from distressed assets.
Although this represents the second-highest realization for creditors after FY19, when Rs 1.11 lakh crore was realized from 77 insolvency proceedings, including major cases like Essar Steel and Monnet Ispat.
In FY23, creditors of debt-ridden firms were able to recover 36% of their total admitted claims of Rs 1,42,543 crore as of March 31, 2023. The combined liquidation value of the assets of the 180 corporate debtors amounted to Rs 39,110.10 crore, and creditors received 131% higher than this value, as reported by the Insolvency and Bankruptcy Board of India (IBBI).
The NCLT also admitted 1,255 applications from creditors for the initiation of the Corporate Insolvency Resolution Process (CIRP) in FY23, which is one of the highest numbers since 2019. In previous years, the NCLT approved 147 resolution plans in FY22, 121 in FY21, and 134 in FY20, resulting in creditors realizing 23%, 17%, and 26% of their admitted claims, respectively.
According to the latest newsletter from the IBBI, the fair value of the assets available with the corporate debtors at the start of the CIRP was estimated to be Rs 2.65 lakh crore, with a liquidation value of Rs 1.70 lakh crore against total creditor claims worth Rs 8.99 lakh crore. Creditors have realized 68.47% of the liquidation value and more than 83% of the fair value.
However, there have been concerns about delays in the CIRP process, as the NCLT is facing a shortage of judges and support staff. Out of the sanctioned strength of 63 judicial and technical members, the NCLT currently has 37 members. Each NCLT bench requires at least one judicial member and one technical member to function.
Under the Insolvency and Bankruptcy Code (IBC), the CIRP process must be completed within a maximum of 330 days. So far, the NCLT has initiated 6,567 CIRPs, out of which 4,515 have been closed. Of the closed CIRPs, 2,485 companies were successfully rescued, while others resulted in various outcomes such as approval of resolution plans, liquidation, withdrawal, or settlement.
The manufacturing and real estate sectors saw the highest number of CIRPs, accounting for 39% and 21% of the total admissions, respectively. The construction sector accounted for 11%, and wholesale and retail trade accounted for 10% of the total CIRP admissions until March 2023.
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