In the quarterly newsletter report, the Insolvency Bankruptcy Board of India (IBBI) has observed a consistent upward trend in resolutions and a significant downward shift in the number of liquidations, starting from 2020-21. “Over the years, more and more companies are being resolved under IBC and the number of liquidations is going down,” the report observed that the ratio of liquidations to resolutions is also on a downward trend.
The Insolvency and Bankruptcy Code, 2016 suggests liquidation to be the last resort for the distressed companies after all attempts to resolve the company fail. The report observed that there is a visible trend reversal in the number of companies going into liquidation under the Code.
The report compares the liquidation of the Corporate Debtor undertaken in 2017-18, with 2024-25. In 2017-18 for every 1 Corporate Debtor that was resolved, 5 Corporate Debtor would go into liquidation. However, in 2024-25 (till Dec, 2024) for every one Corporate Debtor that is resolved, 1.3 Corporate Debtor’s go into liquidation.
Given that many distressed entities are being liquidated under the Code and there is a growing need to improve realisation for claimants, it is imperative that the liquidation process be reformed further for improved outcomes.Durgesh Khanapurkar, Partner, Desai & Diwanji
Jayesh H, Co-founder of Juris Corp Advocates and Solicitors highlights two trends, firstly, Many of cases filed in the initial years were basket cases which should have been wound up long back. However, schemes like CDR and laws like SICA kept many such cases alive. In most such cases while the real value deteriorated, the liabilities mounted and the assets were outdated. Hence, many went into liquidation. And secondly, The other tend that could be at work is the Indian mindset of being averse to putting end to things! So increasingly, there are are cases where what should be put into liquidation, still ends up getting revived. The introduction of
Sale as a Going Concern in Liquidation is reflection of this.
A missing data point that can help differentiate is the time between the first financial default (being declared a NPA) to getting admitted into CIRP.Jayesh H, Co-founder of Juris Corp Advocates and Solicitors
“Would not be surprised if in the initial years of IBC, this period runs into more than 10 years and for recent cases it is much shorter,” he commented.The increasing number of cases filed under India’s Insolvency and Bankruptcy Code (IBC), coupled with a declining rate of liquidations, signals a maturing insolvency ecosystem reflecting growing creditor confidence in the IBC’s effectiveness, as they are increasingly utilizing it to recover dues.
Ayush Jindal, Advocate Supreme Court said, “The growing number of cases under the IBC and declining liquidation is a reflection of the insolvency ecosystem maturing in India.”
“This is a significant development that signals improved creditor confidence, improved operational turnaround strategies, and greater efficiency in decision-making by the Committee of Creditors,” he added.
The evolving jurisprudence of IBC, coupled with regulatory robustness and judicial precedents has strengthened its role as a reliable debt resolution mechanism.Ayush Jindal, Advocate Supreme Court
