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Operational creditors begin to take backseat
Mint Mumbai
|August 24, 2023
Creditors tended to use IBC as a payment-recovery tool. That is changing
Operational creditors, who have previously aggressively initiated bankruptcy proceedings against clients for payment delays, are adopting a less confrontational stance of late.
Data from the Insolvency and Bankruptcy Board of India (IBBI) for the June quarter shows that operational creditors, who had outnumbered financial creditors like banks by a wide margin in initiating bankruptcy action against defaulting firms in the five years till FY22, have for the first time fallen behind lenders in invoking the bankruptcy code during FY23.
In the year ended 31 March, only 536 bankruptcy cases initiated by operational creditors were admitted to courts, compared to 654 cases by financial creditors, data showed.
The trend continued in the June quarter of this fiscal, where only 102 operational creditors initiated bankruptcy action against their clients against 118 lenders who dragged defaulting companies to tribunals invoking the Insolvency and Bankruptcy Code (IBC).
This story is from the August 24, 2023 edition of Mint Mumbai.
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