The Code For Resolution

The government aims to bring a fresh set of amendments to the Insolvency and Bankruptcy Code in the Monsoon Session of Parliament but faces a stiff path ahead

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The insolvency petition of Go First Airlines before the National Company Law Tribunal (NCLT) has again brought the six-year-old Insolvency and Bankruptcy Code (IBC), a marquee legislation for the resolution of high-value bankruptcy cases, in the spotlight.

Jet Airways was the major airline dragged to the bankruptcy court under the IBC in 2018, which has led to an almost liquidation of the airline and a massive haircut of over ₹8,000 crore debt for lenders, not counting the withdrawal of a big airline for service, job loss to over 25,000 and high airfares for years for travellers.

Against this backdrop, Go First bankruptcy is a litmus test for the IBC, where the mechanism can break away from its historical trend of taking over 400 days to resolve cases and deliver a swift resolution. More often than not, IBC rulings have led to liquidation rather than revival, largely due to the considerable time lost during the process.

THE STATUS

The implementation of the IBC in 2016 aimed to reshape the credit culture in India by establishing a time-bound resolution process that favoured creditors. However, the actual outcomes under this framework have fallen short of expectations.

As of March ‘23, a total of 6,571 cases were admitted under the IBC, nearly half of these cases being initiated by operational creditors, which mainly comprise small and medium enterprises seeking to recover dues from larger companies.

Among the admitted cases, 4,515 have been closed, with proceedings ongoing in the remaining. About 45% of the closed cases ended up in liquidation, while the rest were either resolved, withdrawn, or appealed.