Slow recovery from dubious pre-bankruptcy transactions

Only a tenth of amount in 'avoidance transactions' disposed of by tribunals recovered in '25

- Gireesh Chandra Prasad

Companies on the brink of collapse tend to do certain transactions that benefit the promoters or close partners but are detrimental to the organization and its creditors. While such 'dubious transactions' can later be set aside during bankruptcy proceedings by tribunals, getting the money back is proving an uphill task.

Data from regulator Insolvency and Bankruptcy Board of India (IBBI) reviewed by Mint showed that in FY25, just 1,322 crore or a tenth of the amount involved in 'avoidance transactions' disposed of by tribunals were recovered. And overall, just 12% of the ₹65,650 crore worth voidable deals executed by promoters and management of 368 companies—and where tribunals have given their verdict—were recovered, according to IBBI.

Such deals could include paying off a friendly creditor just before bankruptcy proceedings while ignoring others, moving assets to related parties or hiding them, selling assets for less than they're worth, or taking loans on unfair or excessive terms.