IBC report card: In 3 years, 48% cases initiated by operational creditors

The Insolvency and Bankruptcy Code (IBC) is groaning under the weight of the cases being referred under it. Of the 2,542 cases now under the IBC, 1,232 or 48 per cent have been initiated by operational creditors, while financial creditors initiated around 1,086 cases or 43 per cent; the rest were done so by corporate debtors. Given the low threshold limit of Rs  1 lakh, operational creditors seem to be more aggressive in dragging debtors to the National Company Law Tribunal (NCLT). 

Recoveries through Lok Adalats and Debt Recovery Tribunals (DRT), too, have fallen significantly since FY16 alongside the number of cases referred under them. Even small creditors now prefer going to the IBC rather than opt for the reliefs under the DRT, or even the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (2002). 

Efforts should be made to find a resolution for such companies outside the NCLT (if possible). It could help save both resources and time for the already hard-pressed NCLT  benches.

Source: SBI Research