The Insolvency and Bankruptcy Board of India (IBBI) released updated data on Corporate Insolvency Resolution Processes (CIRPs) that concluded with orders of liquidation as of 30th September 2024. The data highlights cases where resolution efforts under the Insolvency and Bankruptcy Code (IBC), 2016 did not succeed in achieving viable resolution plans, leading to liquidation.
The report reflects that liquidation orders were issued primarily in cases where:
No resolution plans were received during the prescribed resolution period,
The Corporate Debtors' business was not viable for revival, or
Resolution plans failed to meet the requirements stipulated under the IBC.
The data further reveals that a significant proportion of entities undergoing liquidation were already defunct or asset-light at the time of initiation of the CIRP, leaving limited scope for resolution. Additionally, a substantial number of cases ended in liquidation due to delays in addressing financial distress prior to insolvency proceedings.
The liquidation process, however, ensures the orderly distribution of the corporate debtor’s assets in compliance with the IBC framework, prioritizing stakeholder claims as per the waterfall mechanism under Section 53 of the Code. This enables equitable recovery for creditors, albeit limited by the value of the remaining assets.
The IBBI’s periodic disclosure of such data underscores the importance of timely intervention and efficient resolution to maximize value and prevent further erosion of assets. It also highlights the need for proactive measures to address financial distress at an early stage, thus reducing the likelihood of liquidation.
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