New corporate bankruptcy cases have dropped since the moratorium

Three high-profile bankruptcy cases were settled in the June quarter

MUMBAI: The number of new corporate insolvency cases has dropped since the moratorium was removed during the first quarter of the current financial year, with an average of 10 new bankruptcy cases being filed every week. It may be mentioned that, in June 2020, the Central Government had banned the filing of new bankruptcy proceedings in case of any payment default for a period of 12 months from March 3, 2020.

According to the latest figures from the Insolvency and Bankruptcy Board of India (IBBI), 18 new bankruptcy cases were filed between April and June 2021.

The pace of bankruptcy and insolvency proceedings is very slow as many new cases were filed during the previous week. Prior to the Corona epidemic, between March 2016 and March 2020, about six bankruptcy cases were filed each week.

The June quarter this year not only saw a decline in filing of new bankruptcy cases but also saw some encouraging resolution figures, thanks to some large amount of cases that were long pending and resolved during this three-month window. Among them are Diwan Housing Finance Company Limited (DHFL), Videocon Group and Jet Airways - the three biggest high profile bankruptcy cases resolved this quarter. In DHFL's bankruptcy case, more than 50 per cent of the creditors' claims were eligible for recovery.

Recent IBBI figures show that out of the eight cases resolved in the June quarter, claims by creditors of DHFL, Videocon and Jet accounted for about 4 per cent of the total recovery claims. In the case of Videocon, the recovery amount is less than 5 per cent, while in the case of Jet, the creditors have received a little more than 15 per cent. Since the introduction of the Insolvency and Bankruptcy Code (IBC) in 2013, the percentage of recoverable claims has been around 5 per cent.