Nine of the twelve large accounts referred by the Reserve Bank of India (RBI) for resolution under the IBC have been resolved and the resolution plans for these corporate debtors yielded 54 per cent of the claims admitted, according to the Economic Survey 2023-24. These debtors included steel and power majors such as Electrosteel Steels Ltd, Bhushan Steel Ltd, Monnet Ispat & Energy Ltd, Essar Steel India Ltd, Bhushan Power & Steel Ltd, and their resolutions played a significant role in the revival of the steel sector.
The framework under Section 227 of the IBC provides for the resolution of financial service providers, and, at present, NBFCs, including Housing Finance Companies with asset size of Rs Rs 500 crore or more, are covered. The framework has enabled the resolution of Dewan Housing Finance Corporation Ltd, Srei Equipment Finance Limited and Srei Infrastructure Finance Limited under this framework. In each case, the creditors have recovered around 42 per cent of the claims.
Real estate recovery
More significant to the real sector is that over 3,000 businesses have emerged out of the CIRP, with continued business operations extending the productive use of resources trapped due to financial distress in these corporate debtors. As of March 2024, over 1500 real estate companies were admitted into the insolvency resolution process under the IBC, accounting for 21 per cent of total admissions. One in four cases settled after admission was also from this sector. Of the 891 corporate debtors resolved, 133 were real estate companies, forming 15 per cent of the companies resolved.
Insolvency resolution of real estate companies posed a unique set of challenges for the standardised corporate insolvency process. Real estate companies have multiple projects spread across geographies, projects at different stages of construction, and diversified
business models. The large number of homebuyers across these projects meant claims from thousands of homebuyers who needed to be included in the process. The judiciary, the Government, and the market have recognised these difficulties and moved in cohesive steps to improve outcomes for these projects. The availability of two new remedial routes led to discord and friction in the system, it said.
