according to Insolvency and Bankruptcy Board of India ,IBBI), 23,417 applications for the start of Corporate Insolvency Resolution Process (CIRP), with underlying defaults of ₹ 7.31 lakh crore, were already resolved before their entry on 31 September.
The development comes amid growing concern among borrowers about losing control of companies under CIRP and the overall time taken by the resolution process. Once CIRP is invoked, the company board is dissolved and taken over by a committee of creditors. The lenders then appoint a resolution professional to manage the company and its resolution process.
Out-of-court settlements usually involve debt restructuring with some infusion of fresh capital to keep the business afloat. These only work in cases where the company has good cash flow and a clean governance record. Nikhil Shah, Managing Director, Alvarez & Marsal, said, “We are seeing an increase in demand for court services including financial restructuring, one-time settlement and sale of stressed assets.” “Creditors and investors are concerned about the resolution timeline for insolvency cases, which is now stretching to two-three years,” said a senior bank executive. Market participants say that lenders are aware of the huge deductions that are likely to be made under the IBC.