NCLT gave nod for resolution plans to the tune of over ₹67,000 crore in FY2024-25 under bankruptcy law
India enacted the IBC, its first comprehensive bankruptcy law in 2016, to improve the overall corporate insolvency resolution process.
The amount recovered through insolvency resolution in FY 2024-2025, is the second highest after ₹1,19,993 crore recovered in FY2018-19 from 81 cases, as per the data.
As many as 1,346 companies were admitted for the corporate insolvency resolution process in 2024-25, when compared to 1,318 companies in 2023-2024.
'Higher levels of recoveries generally indicate that the code is generally better compared to other methods for resolution. However, we should also keep in mind that the data can be skewed by a few high value recoveries,' Saurabh Bhalerao, associate director, BFSI Research, Care Edge Ratings said.
Further the amount has to be considered against the quantum of admitted claims of over ₹11 lakh crore (as of December 2024). This higher resolution can also be attributed to lower vacancy at the NCLT where new members have been added boosting its capacity as well as streaming of regulatory processes, he added.
IBC has gained prominence in the past few years with a recovery rate of around 31%. Meanwhile, ongoing cases have hovered slightly below the 2,000-case mark for the last few years, Mr. Bhalerao said.
However, the quantum of time required to resolve a case adequately remains elevated due to ongoing litigation at NCLT and other forums. Several measures are being contemplated to preserve the business value of the underlying asset and reduce the timeline (as faster resolutions typically generate higher recoveries), such as formal out-of-court solutions such as Mediation, an extension of the pre-pack resolution mechanism to larger firms (currently available for MSMEs), and insolvencies of group companies, he pointed out.
A measure of the effectiveness of the IBC is the ratio of liquidation to resolution. With several initiatives to improve outcomes, the ratio has improved from 5.06 in FY18 to 1.32 in the nine months of FY25, Mr. Bhalerao added.
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