Liquidation remains high in NCLT cases

Out of 1,351 closed cases, only 190 cases were resolved; average haircut was 57%

More than half of the cases admitted to the National Company Law Tribunal (NCLT) are been liquidated as recovery through resolution continues to elude creditors, latest data released by the Insolvency and Bankruptcy Board of India (IBBI) showed.

A total of 3,312 cases were admitted in the insolvency courts till the end of the third quarter of the financial year, of which 561 were during the Oct-Dec period. This was the second highest number of cases admitted in a quarter after the July-September period of the current financial year when 565 cases were admitted.

Out of a total of 1,351 closed cases, 780 or 58% were closed through liquidation and only 190 cases or 14% were resolved with an average haircut of 57% on admitted claims.

For the third quarter, haircuts for cases resolved were high, around 88%.

“Barring a few cases, almost all resolutions in 3QFY20 had a haircut of over 60%,” Kotak Securities said in a note to its clients.

“A high number of liquidated cases and duration of resolution remain primary concerns,” the note said.

The number of cases admitted in the NCLT has been increasing, with 561 cases admitted during the October-December period. Out of the total number of cases admitted, 50% were filed by financial creditors.

“This reflects the increasing pivotal role played by this body in resolution of stressed assets despite the introduction of a new circular from RBI in June 2019 which removed the clause that made it mandatory for cases to be admitted to IBC,” Kotak Securities said.

Of the 182 cases which were closed in the third quarter, 30 cases were resolved while 134 cases faced liquidation.

The note also pointed out that the average duration of resolution was over 350 days for all resolved cases till December, while more than 30% of cases have crossed 270 days.

Source: Read Full Article