 "Downward shift in liquidations seen under IBC: IBBI chairperson Ravi Mittal")
Since the introduction of Insolvency and Bankruptcy Code (IBC) more companies are being rescued and the count of liquidations is coming down, the Insolvency and Bankruptcy Board of India (IBBI) said in its latest newsletter.
The insolvency regulator said that in 2017-18 for every one case that was resolved, five companies used to go down the liquidation path.
In 2024-25 (till December) the IBBI data showed that for every one company resolved 1.3 went into liquidation.
“There is a visible trend reversal in the number of companies going into liquidation under the code. While the liquidation process has undergone important course corrections over the years, there is scope for further improvement,” Ravi Mittal, chairperson, IBBI said in the newsletter.
As on December 31, 2024, around 44 per cent of the total number of insolvency cases were closed through liquidation. Till December, 2024, 2,707 corporate insolvency resolution processes have ended in liquidation ending up in realisation of ₹8,788 crore against total admitted claims of ₹ 2,43,703 crore.
Of the total cases ending in liquidation, 211 had admitted claims of more than ₹1,000 crore with aggregate claims of ₹9.59 trillion. However, IBBI data said that the assets on the ground for these companies were valued only at ₹0.45 trillion.
The data till December 2024 shows that only 93 companies were closed by sale as a going concern under the liquidation process with claims amounting to ₹1,48,537.56 crore, as against the liquidation value of ₹5432.97 crore.
“The liquidators in these cases realised ₹4408.59 crore and companies were rescued,” the IBBI said.
The insolvency regulator highlighted in its report that the amount realised by claimants in the completed liquidation cases has been very low as compared to corporate insolvency resolution process, and in some cases it has been even lower than the liquidation value.
“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,” Mittal added.
IBBI is currently running a pilot project, BAANKNET (Bank Asset Auction Network, formerly known as eBKray) for IBC e-auctions which will be improved based on the experiences of usage.
“Encouraged by the platform’s success so far, IBBI has decided to extend this digital framework to liquidation processes under the IBC,” Mittal said.
To date, around 210 assets have been listed, and 25 auctions have been scheduled or conducted on the platform.
IBBI expects that the centralised e-auction platform will set a benchmark for enhanced information dissemination, improved price realisation, and greater transparency.