Insolvency regulator IBBI has highlighted a welcome trend of more companies being “resolved” under Insolvency and Bankruptcy Code (IBC) and the number of liquidations going down in recent years.
There is a consistent upward trend in corporate resolutions and a significant downward shift in the number of liquidations, starting from 2020-21, IBBI Chairman Ravi Mital said in latest quarterly newsletter of IBBI.
In 2017-18, for every corporate debtor (CD) that was resolved, five CDs would go into liquidation. However in 2024-25, for every CD that is resolved, 1.3 CDs go into liquidation.
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“Therefore, there is a visible trend reversal in the number of companies going into liquidation under the Code,” Mital added.
While the liquidation process has undergone important course corrections over the years, there is scope for further improvement.
IBBI has observed that till December 2024, in the completed liquidation cases, the amount realised by claimants has been very low as compared to CIRP, and in some cases, it has been even lower than the liquidation value.
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Need to improve
Given that many distressed entities are being liquidated under the code and there is a growing need to improve realisation for claimants, it is imperative that the liquidation process be reformed further for improved outcomes, IBBI Chairman said.
IBBI has amended the liquidation process regulations from time to time to make the process more efficient, Mital added.
Hari Hara Mishra, CEO, Association of ARCs in India, said the sharp decline in Liquidation to Resolution ratio from five in 2018, now to just 1.3, is testimony to effectiveness of IBC as a resolution mechanism.
“What is also important is that out of 2,653 cases liquidated, 2,069 were carried over from BIFR/ defunct, with only 6 percent value left. Against this background, liquidation performance needs to be evaluated and it is likely to yield much better results with series of measures undertaken last year to improve liquidation outcome”, Mishra added.
Anjali Jain Partner at Areness, said that IBBI has achieved unprecedented results in less than a decade of its inception. “The various strategies adopted by the IBBI complemented by the government is bringing higher numbers of prospective resolution applicants bidding from various sectors to reap benefits from the opportunities created in distressed assets by the Insolvency Code,” she added.
