Bankruptcy resolutions peak in FY25, creditors recover over ₹67,000 crores
This improvement comes as the government filled vacancies in bankruptcy tribunals and the sector's regulator continued refining rules to enhance the efficiency of the corporate turnaround ecosystem.
Creditors stand to recover over ₹ 67,000 crore from these transactions in the recently concluded financial year, a 42% increase compared to the amount recoverable from the turnaround of 275 companies achieved in the same period last year, the data showed.
This development comes amid improving outcomes under IBC—the key policy tool for repairing the balance sheets of lenders and corporations, which is a priority for the NDA government that is banking on a fresh cycle of private investments to bolster economic growth and create jobs.
According to the data, as of the end of March, there were only three vacant positions in the 63-member tribunal overseeing bankruptcy cases and company law-related matters, marking a significant improvement in strength after a series of retirements. On 4 October 2022, Mint reported that NCLT had only 28 members then. The tribunal had only 43 members as of end of September last year.
NCLT president Justice Ramalingam Sudhakar had last year highlighted the need for manpower capacity addition in the tribunal, at the Insolvency and Bankruptcy Board of India's (IBBI) annual day. 'Give me the numbers, I will give you the result,' he said then, Mint reported on 1 October last year.
The uptick in successful resolutions under the IBC reflects maturing institutional capacity, growing creditor confidence and the strengthening of IBC jurisprudence, said Yogendra Aldak, Partner at Lakshmikumaran and Sridharan Attorneys.
Developments such as the introduction of mediation, pre-packaged insolvency scheme for micro, small and medium enterprises and landmark Supreme Court rulings on personal guarantor liability and on rejection of delayed claims post-corporate insolvency resolution process have laid the groundwork for faster, more efficient resolutions, said Aldak.
The amount recoverable from bankruptcy resolutions achieved in FY25 is second only to the ₹ 1.19 trillion reported recoverable from 81 corporate turnaround cases in FY19. That year witnessed the debt resolution of Essar Steel India Ltd. after a joint venture between the world's largest steelmaker ArcelorMittal and Japan's Nippon Steel Corp. acquired the company for ₹ 42,785 crore under IBC proceedings.
Karvy Data Management Services Ltd, Era Infra Engineering Ltd, Sks Power Generation (Chhattisgarh) Ltd, Lanco Amarkantak Power Ltd, Coastal Energen Pvt. Ltd and Metalyst Forgings Ltd, are among the companies that have got debt resolution plans cleared by NCLT in FY25, as per data available from Insolvency and Bankruptcy Board of India (IBBI), the sector's rule maker and regulator of professionals.
In each of these cases, creditors stand to realise more than ₹ 1,000 crore of their dues. In the case of Lanco Amarkantak Power, the realisable value reported by IBBI is ₹ 4,101 crore.
Experts also said that persistent litigation challenges such as appeals, interlocutory applications, delayed claims, and even invocation of writ jurisdiction continue to disrupt bankruptcy resolution timelines even after a resolution plan has been approved by the distressed company's committee of creditors.
'To improve outcomes, a targeted approach is required to ensure stricter adjudication timelines, increase in the number of dedicated and technical benches, and faster mechanisms for collation of claims,' said Aldak of Lakshmikumaran and Sridharan Attorneys. 'Going forward, it is essential that the Code evolves in line with commercial realities, enabling a synchronous quantitative and qualitative improvement in resolutions.'
On Wednesday, NCLT president Sudhakar, during the hearing of the resolution plan for Bhushan Power & Steel Ltd, spoke about the need to increase NCLT's sanctioned strength above its existing strength and add new benches.
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