More than half of all the businesses that secured approvals for their debt resolution schemes and about two-thirds of the cases cleared in July were in the real estate and hospitality sectors. The National Company Law Tribunal approved the debt resolution plans of 22 businesses in August, maintaining the pace of salvaging distressed companies, official data showed. Including the 12 corporate restructuring schemes approved in July, 34 businesses have received a green signal for a fresh start, so far in the July-September quarter, showed data available from Insolvency and Bankruptcy Board of India (IBBI). In the June quarter, 58 firms had secured approvals for their rescue plans. More than half of all the businesses that got their debt resolution schemes approved in August and about two-thirds of the cases cleared in July were in the real estate and hospitality sectors, highlighting a point of distress in the economy. In the financial year ended March, the National Company Law Tribunal approved a record 269 resolution plans, a 42% jump from the year before in the number of companies reaching debt resolution. With more capacity planned in tribunals and greater technology integration of all stakeholders in the bankruptcy ecosystem, the number of cases getting cleared is expected to increase. However, the official data only indicate the cases admitted in tribunals and cleared or withdrawn, not the number of cases that were initiated but yet to be admitted. Since the roll out of the new bankruptcy resolution regime in 2016, bankruptcy petitions were withdrawn in 2,288 cases before admission due to factors including settlement between debtors and creditors.
Improving the rescue process:
Speeding up the time taken to stitch together rescue plans and the extent of value of the assets recovered have been the priority for the Government. At the end of June, nearly 2,000 cases were at different stages of debt resolution proceedings under different benches of NCLT. Among these, two-thirds have exceeded the 330-day timeline prescribed for debt resolution, which excludes the time spent in legal proceedings. To speed up the rescue of distressed businesses, the Government had amended the Insolvency and Bankruptcy Code (IBC) six times, since it was rolled out in December 2016. In 2023-24, the rules were amended a dozen times to incorporate 86 changes to the regulatory framework, according to information available from the Ministry of Corporate Affairs. The Government is taking steps to strengthen the NCLT infrastructure, including filling up vacancies in the Tribunal and the Appellate Tribunal, Minister of State for Corporate Affairs, Harsh Malhotra recently informed Parliament. Finance Minister, Nirmala Sitharaman said in her budget speech in July that the Government would establish an integrated technology platform for all stakeholders involved in the debt resolution of distressed companies, including IBBI, lenders and tribunals for quick, uniform and efficient rescue of companies.
