Need to improve liquidation outcomes: IBBI chairman

Insolvency and Bankruptcy Board of India (IBBI) Chairman Ravi Mital said there is a growing need to improve liquidation outcomes under the Insolvency and Bankruptcy (IBC) Code, 2016.

“It is observed that till December 2024, in the completed liquidation cases, the amount realised by claimants has been very low as compared to the Corporate Insolvency Resolution Process (CIRP), and in some cases it has been even lower than the liquidation value,” he said in the IBBI’s quarterly newsletter for October-December 2024.

The main objective of the IBC is resolution of distressed companies. However, when all attempts to resolve the company fail, the next alternative is liquidation of the company involving sale of assets of the company and distribution of the proceeds thereon among the stakeholders, Mr. Mital said in the newsletter.

“In 2017-18, for every company that was resolved, five companies would go into liquidation. However, in 2024-25 [till December 2024] for every company that is resolved, 1.3 companies go into liquidation. Therefore, there is a visible trend reversal in the number of companies going into liquidation under the code,” Mr. Mital said.

While the liquidation process has undergone important course corrections over the years, there is scope for further improvement. Given that many distressed entities are being liquidated under the code and there is a growing need to improve realisation for claimants, it is imperative that the liquidation process be reformed further for improved outcomes, he said.

As per the data shared in the newsletter, as on December 31, 2024, 1,274 companies were completely liquidated with submission of final report. The realised value in these cases was ₹8,788.18 crore, when compared with the liquidation value of ₹9,784.59 crore. The total number of admitted claims was ₹24,3703.2 crore.