By Ankur Mishra,
Lenders might miss their recovery target by more than Rs 50,000 crore through the March quarter (Q4FY21) due to delay in the approval of resolution plans by bankruptcy courts. These circumstances consist of Dewan Housing Finance Corporation (DHFL), Jet Airways, Reliance Communications and Videocon, amongst other people.
In all of these circumstances, the committee of creditors (CoC) has currently authorized the resolution plans, but final nod is awaited from courts. Once authorized by the court, lenders will acquire Rs 34,250 crore in DHFL, Rs 23,000 crore by means of Reliance Communications and Rs 3,000 crore by means of Videocon resolution, amongst other people. Many lenders had announced their projection of recovery in Q4FY21 through the earnings presentation held in the December quarter.
For instance, Union Bank of India had projected to recover about Rs 3,000 crore by means of DHFL and Bhushan Power and Steel (BPSL) resolution. Although, lenders have been in a position to recover Rs 19,350 crore from BPSL resolution, DHFL resolution is nonetheless awaiting nod from National Company Law Tribunal (NCLT).
An Icra report had earlier estimated that economic creditors might realise just Rs 60,000-65,000 crore in 2020-21 (FY21) from the Insolvency and Bankruptcy Code (IBC), as compared to about Rs 1 lakh crore in FY20. With the moratorium on new insolvency proceedings beneath the IBC code been lifted, authorities anticipate an avalanche of distressed businesses and genuine estate projects in the months to come.
The withdrawal of relaxation by the government would imply that creditors and lenders would strategy courts and tribunals in complete may possibly to recover from final years monetary depression, stated Sonam Chandwani, managing companion at KS Legal & Associates.
Similarly, Misha, companion at Shardul Amarchand Mangaldas, stated, “The backlog of cases will increase unless pro-active steps are taken by the bar and the bench in a cohesive manner to efficiently use the virtual/hybrid systems of hearings prevailing at present to expeditiously deal with pendency.”
Ashish Pyasi, associate companion, Dhir and Dhir Associates, stated, “In order to expedite the process specially after the approval from the CoC, increasing the strength of the bench will help in expediting the hearing of applications for approval of resolution plans.” Also, the preference to these applications will additional expedite the course of action, he added.
Earlier, the economic stability report released by Reserve Bank of India (RBI) also highlighted that the typical time taken for resolutions has been substantially more than the outer limit prescribed in the Insolvency and Bankruptcy Code (IBC).
The corporate insolvency resolution course of action (CIRPs) took an typical of 433 days as of September 2020, compared to maximum period of 330 days prescribed in the IBC.