“One has to look at the IBC process in comparison with the previous regime under the BIFR. If you look at the cost of resolution process, it is 0.5 per cent of money realised but in BIFR, the cost was 9 per cent. In terms of the time taken under IBC it takes on an average 300 days to resolve the cases,” Sahoo said.
The numbers are also a part of an affidavit submitted by the IBBI in the National Company Law Appellate Tribunal (NCLAT). During a hearing in the ongoing CIRP of Essar Steel India Limited, the appellate tribunal had asked IBBI to submit the details of the average distribution of funds between operational and financial creditors of various companies that had successfully undergone the debt resolution process under IBC.
In its affidavit, the IBBI had submitted that of the 88 companies, which have successfully undergone CIRP, financial creditors have received about 48.24 per cent, while the operational creditors have received nearly 48.41 per cent of their admitted claims. It is the commercial freedom of the committee of creditors to decide who gets how much as the IBBI has no say in it, the counsel appearing for the insolvency board had told the NCLAT.
Apart from the companies undergoing CIRP, there are a large number of companies, which have opted to settle the debts of the lenders before they are admitted for insolvency by the National Company Law Tribunal (NCLT), he said.
“Apart from the 88 cases that have been resolved, 70-75 cases have been withdrawn under section 12(A) of the act. Thousands of cases have been withdrawn after creditors took companies to the NCLT but before they were even heard or admitted,” Sahoo said. The numbers were affirmed by Finance Minister Arun Jaitley on Friday who said that the IBC has brought about an ethical discipline in businesses.
Speaking at the Business Standard Awards on Friday, Jaitley said that two-thirds of the amount due to lenders had been recovered without resolution or winding up the companies concerned. “Without adjudication, there have been changes in business ethics. Earlier, companies ran after bankers, and then bankers ran after companies. Now the situation has been reversed,” he had said.
As many as 12,000 cases have been filed since the implementation of the IBC and setting up of NCLT, according to government data. Of these, while 4,500 cases have been settled before resolution leading to recovery of Rs 2 trillion, nearly 1,500 cases have been admitted. The other 6,000 cases are waiting in queue to either be settled or admitted, according to the data.