NEW DELHI: Insolvency & Bankruptcy Code (IBC) may have helped recover around 31% of claims in corporate insolvency cases but when it comes to recovering the amount offered as personal guarantees the record is very poor.To begin with, admission itself is taking a lot of time. According to the latest data released by insolvency & Bankruptcy Board of India (IBBI), of 5,186 applications filed by creditors and companies since Dec 19, resolution professionals has been appointed in just around 41% or 2,137 cases, including 51 by the debt recovery tribunals. And, within this so far, only 64 cases have yielded approval of repayment plan and creditors have realised Rs 235 crore — which is around 1% of the admitted claims. This translates into average realisation of Rs 3.7 crore.
Of 5,186 applications filed for recovery under personal guarantees, resolution professionals were appointed in 2,137 cases, while only 64 had been decided.
A majority of personal guarantees were offered by promoters of companies — from Ruias of Essar to Bhushans of Bhushan Steel and Dhoot of Videocon — to secure loans or loan restructuring for companies that they once controlled but failed to repay. IBC was drafted in a way that it allowed banks and other creditors to invoke the provisions to recover the dues from guarantors, in case the claims were not fully realised through the corporate insolvency resolution process.In the case of personal guarantees, the law provides for a repayment scheduled to be agreed upon. Current data so far indicates that including the repayment from the guarantors, the amount realised by the creditors will be less than a third of the overall claims.While a bunch of avoidance claims have also been filed by resolution professionals based on forensic audit of companies that have been taken up for resolution under IBC, details of amounts realised were not shared by IBBI. Data released showed avoidance transactions, including diversion, of over Rs 4.6 lakh crore in 2,132 cases.In its first decade, the law has emerged as a deterrent for promoters of companies who default in payments to banks and suppliers. Fearing loss of control, over 30,000 cases filed before NCLT were resolved at the pre-admission stage through withdrawals, involving amounts estimated at nearly Rs14 lakh crore.
