New Wave of Rescue: 63 Companies Given Fresh Start Under Insolvency and Bankruptcy Code

New Delhi, October 10 - In a welcome move for policy makers and stakeholders, 63 indebted companies have been given a new lease of life in the September quarter under the Insolvency and Bankruptcy Code (IBC), marking nearly half the number of distressed businesses to be saved so far this year.

The IBC has so far helped rescue 121 companies out of bankruptcy, according to official data released by the International Bankers Federation of India (IBBI). This brings the total number of firms pulled back from insolvency in eight years since the code came into force to 1,068.

Data also showed that vendors and other service providers have initiated fewer bankruptcy claims against their clients compared to lenders in recent financial years. This trend is seen as a positive development for policymakers who had expressed concerns over vendors using IBC as a means of recovery.

According to IBBI Chairman Ravi Mital, the regulatory review has been finetuned to enable quicker decision making by the National Company Law Tribunal (NCLT). "On a conservative scale, decision on avoidance transactions would add recovery to creditors by at least 10%," he said in an update.

Mital also suggested that details of these transactions be part of the competitive bidding process for fresh investors so that it gets accounted for in the bids received.

The government's efforts to amend the IBC and bring more clarity into the code are seen as a step towards resolving dubious deals entered into by companies or their promoters just before their business slipped into bankruptcy. The IBBI has been successful in recovering over ₹7,516 crore from such transactions this year alone, a 12% jump from the recovery ordered till the end of June quarter.

Debt resolution professionals have so far referred 1,326 transactions worth over ₹3.76 trillion to tribunals. These avoidance transactions are identified as one of the primary causes leading companies to financial distress and eventual landing in bankruptcy tribunals.

As policymakers continue to review the IBC, stakeholders are cautiously optimistic about the prospects for revival under this code.