The introduction of bankruptcy law in India has improved credit culture, but there has been a decline in recoveries and resolution timelines have been prolonged, according to Crisil Ratings. Recovery rates have fallen to 32% in September 2023 from 43% in March 2019, and the average resolution time has increased to 653 days. The Insolvency and Bankruptcy Code has resolved debt worth Rs 3.16 lakh crore, but there are challenges regarding recoveries and timelines.
The Insolvency and Bankruptcy Board of India (IBBI) has proposed a two-part resolution plan structure to ensure the swift takeover of stressed firms without delay. The plan aims to prevent asset value erosion and streamline the resolution process. It also addresses the issue of distribution of resolution proceeds among stakeholders. The regulator has sought public comments on the proposed changes to regulations, including providing clarity on the entitlement of dissenting financial creditors and making the fair value of a stressed firm part of the information memorandum for potential suitors.
Veteran lawyer Shardul Shroff has approached the Supreme Court on behalf of Torrent Investments to expedite the hearing on the company’s application to stay the second challenge mechanism in a corporate insolvency resolution process for the Anil Ambani-promoted Reliance Capital.
