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Journalism of Courage
Banks are estimated to have lost out on about Rs 4,000 crore in additional income for the initial 12 companies in the RBI’s list of June 2017 due to the delays in the resolution process beyond the 270-day period under the Insolvency and Bankruptcy Code (IBC), rating firm ICRA said.
Of the 12 large accounts, only four cases have been successfully resolved whereas the other cases still remain unresolved even after more than 450 days have surpassed since being admitted by the NCLT (except for Era Infra Engineering Limited). “Some of these entities have been entangled in litigations emerging out of new areas such as factoring in late bids by resolution applicants, interpretation of Section 26A on eligibility of applicants etc,” ICRA said in a report.
ICRA said it expects that the judgements on these litigations would set a precedent for future resolution processes and thus help in easing the entire resolution process and ensuring timely completion of the same in the future. “The commitment of the various stakeholders to achieve this objective would remain important, going forward,” it said.
Till September 30, 2018, there have been 52 resolution plans approved by the NCLT which has led to the financial creditors realising (upfront or in staggered manner) a cumulative amount of about Rs 58,400 crore. “Nevertheless, the prolonged period of completing the resolution process results in delays in the cash inflows for the creditors which in turn hampers their ability to deploy the same in other return-generating avenues,” ICRA said. As on September 30, 2018, 212 cases had been resolved through liquidation as compared to only 52 cases where a resolution plan was approved, it said. The average duration from the date of admission to the date of approval of the resolution plan to move the company to liquidation by the NCLT has been about 260 days for cases completed till now which could be shortened, it said.
“Some of these entities were already non-operational when being reported to the NCLT, and the delays in the process only further deteriorates the asset value. In fact, for about 60 companies, the entire resolution process after the admission of the application by the NCLT took more than 300 days. Thus, based on the judgement of the resolution professional, there could be a case for hastening the pace of resolution for cases where there has been no interest shown by potential bidders,” it said.
