Data published by the Insolvency and Bankruptcy Board of India for the financial year 2022-23 reveals that the National Company Law Tribunal approved 189 resolution plans during the year, with realisation for financial creditors averaging 32 per cent against admitted claims. The figures reflect both the continued scale of the insolvency resolution framework under the Insolvency and Bankruptcy Code, 2016, and persisting challenges around resolution timelines and recovery rates.
Background
The IBC, enacted in 2016, established a time-bound framework for corporate insolvency resolution, initially targeting completion within 180 days (extendable to 270 days) from the date of admission. The statutory maximum, as amended, now stands at 330 days including litigation time. However, operational realities at the NCLT and NCLAT have led to significant overruns. As of September 2023, the average resolution time for cases that yielded approved plans had risen to approximately 653 days, substantially exceeding the statutory ceiling.
The IBC framework has processed over 7,000 applications since inception, with a significant proportion resulting in liquidation rather than resolution. The recovery rate — the ratio of resolution plan value to the total admitted claims of financial creditors — has been a closely watched metric. This rate peaked at approximately 43 per cent in FY2018-19 before declining to 32 per cent by FY2022-23, reflecting the entry of more complex and deeply distressed cases into the resolution pipeline.
Key Provisions
The IBBI data and associated publications highlighted the following metrics and developments:
Resolution plan approvals: 189 plans were approved in FY2022-23, reflecting a steady throughput. The pipeline includes cases admitted across all NCLT benches, with Mumbai and New Delhi handling the largest share.
Recovery rates: Financial creditors realised 32 per cent of admitted claims through approved resolution plans. For large firms, recovery was marginally higher at 32.6 per cent, while smaller cases showed greater variance in recovery outcomes.
Liquidation outcomes: A significant number of admitted cases continued to result in liquidation, where creditor recovery rates are typically in single digits. The proportion of cases entering liquidation versus successful resolution remains a concern for the framework's efficacy.
Pre-packaged insolvency: The pre-packaged insolvency resolution process, available for MSMEs since April 2021, recorded a realisation rate of 25 per cent against admitted claims — lower than the standard CIRP route but offering faster resolution timelines.
Implications for Practitioners
The declining recovery trend from 43 per cent to 32 per cent over four years warrants attention from insolvency practitioners and financial creditors designing resolution strategies. This trajectory suggests that the marginal cases now entering the IBC system are more deeply impaired, with lower asset values relative to outstanding liabilities.
For resolution applicants, the data indicates that competitive bidding dynamics may be yielding lower haircuts for acquirers, as resolution plans increasingly offer modest fractions of the total admitted debt. Practitioners advising resolution applicants should factor in the realistic recovery expectation when structuring resolution plans and negotiating with the committee of creditors.
The average resolution timeline of 653 days, nearly double the statutory maximum, continues to be the framework's most significant operational deficiency. Practitioners should proactively manage stakeholder expectations regarding timelines and account for litigation before the NCLAT and Supreme Court when advising creditors on expected resolution durations.