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CIRP: An analysis of its success rate with numbers


India approved the Insolvency and Bankruptcy Code in 2016. The IBC or the Insolvency and Bankruptcy Code was said to be one of the biggest economic reforms in the country and brought about some substantial adjustments and improvements to the bankruptcy process in India. It provided for a Corporate Insolvency Resolution Process or CIRP, which is a recovery method whereby creditors or the corporate entity itself may initiate insolvency proceedings against the corporate entity when it is unable to repay its debts. It was commonly believed that this process will quicken India’s insolvency process as it provides for a 180-day deadline extendable up to 90 days to wrap up the insolvency process. According to the 2015 report of the World Bank Doing Business Indicators it took India 4.3 years on average for resolution of insolvency with a mere recovery rate of 25.7% [1]. Now the question remains whether there has been any improvement in insolvency resolution since the implementation of the code and introduction of CIRP.


The Insolvency and Bankruptcy Code, 2016, which has only been in effect for 5 to 6 years has professionalised the stress-resolution process and affirmed the primacy of markets and the rule of law. The CIRP process of the Code has accomplished several things, including granting freedom of exit, saving businesses in financial trouble, liberating idle resources from unproductive uses, assisting creditors in collecting their debts, and most importantly changing the behaviour of both debtors and creditors. According to the Doing Business 2020 report, India has improved dramatically, moving up from 136th place in 2016 to  63rd place in 2020 in the category of resolving insolvency [2]. It has substantially changed India’s insolvency resolution process and credit culture by assisting in the recovery of Rs 2.5 lakh crore, or almost one-third of the acknowledged financial claims from insolvent enterprises [3]. Even though the IBC has shifted the balance of power away from debtors and strengthened India’s bankruptcy resolution ecosystem, its performance in relation to its dual goals of maximising recovery and achieving time-bound resolution has been inconsistent. Only a few significant examples have seen higher recovery. The recovery rate drops to 18% when the top 15 instances by resolution value are taken out of the 396 resolved cases (Chart 2). The aforementioned resolved cases had an average resolution time of 419 days as opposed to the allowed limit of 330 days. The majority of unresolved cases roughly 75% have already been pending for more than 270 days. According to Nitesh Jain, Director, CRISIL Ratings Ltd., a significant problem is the high number of cases moving to liquidation. This is in addition to the poor recovery rate and prolonged timeline. According to Chart 1, over one-third of the 4,541 accepted cases had been liquidated as of June 30, 2021, with a recovery rate of only 5%. However, almost 3/4 of these patients were either diseased or dead. It is anticipated that recovery rates and turnaround times would increase with the closure of these historical cases.


To analyse the success rate of the Corporate Insolvency Resolution Process of Insolvency and Bankruptcy Code, 2016.


The methodology used was quantitative methods. Secondary data was collected from various published and publicly available sources. The data obtained from all the various sources have been used in the study.

Analysis of Success Rate of CIRP:

In all, 4,541 instances of the Corporate Insolvency Resolution Process were accepted from 2016 to 2021 with corporate debts totalling 13.94 lakh crore [4]. Only 20% of the acknowledged debt claims, or 1.82 lakh crore, were realisable or realised till June 2021, resulting in an 80 percent debt reduction or a net loss. Industrial and Financial Reconstruction (BIFR) operated under the Sick Industrial Companies (Special Provisions) Act of 1985, with a recovery rate of 25% a significantly higher result in contrast. Not just that, a significant portion of CIRP cases end in liquidation, when a settlement results in the complete shutdown of a firm, creating job losses and giving debtors a pittance in return. 29.7% of the 4,541 CIRP cases had entered liquidation (Chart 3). The number of jobs lost as a consequence is unknown, however, borrowers have had 95% of their debts cancelled. Together, the loss of credit and the loss of businesses and employment indicate that the economy is suffering, something that the IBC aimed to stop.

There are several additional unsettling facts hidden under the overall image of an 80 per cent haircut loss. In contrast to the 384 CIRP cases that were resolved, it resulted in an average haircut of 64%, and the debtors in the Videocon case suffered a colossal loss of 95.3%. Out of the acknowledged debt claims totalling 61,770 crores, the debtors received just 2,898 crores in the resolution in June 2021.

The Ruchi Soya Industry’s case from 2019 is also peculiar as in this case banks agreed to book a loss of 65 percent (settled for 4,350 crores against the debt of 12,146 crores), and then immediately approved 3,200 crores for Baba Ramdev’s Patanjali group to run the same sick company (Ruchi Soya), which was acquired.

Another important promise made by the IBC, quick settlement, has also been broken. According to IBBI data, 80% of cases have gone beyond the 180-day limit, with 75% of cases taking longer than 270 days to resolve, contrary to its mission.

Chart 3: No. of cases admitted, their resolution and liquidation


IBC and its CIRP are failing to perform as expected, its allure have faded. The law has been weakened by the delays. Delays begin as soon as a case is filed  and, in some instances, they persist long after the committee of creditors has accepted the settlement. Since banks are unable to stop an asset from losing value, the promoters have ample opportunity to move funds and deplete the company’s coffers as a result of the legal delays [5]. The delays are apparent, with 73% of the cases taking longer than the 270 days allowed by the statute. Vacancies on corporate law benches across states, a lack of predetermined guidelines, and protracted decision-making at the bank level, according to industry veterans, are having a negative impact. These assets are currently losing value as a result of the delays. Additionally, some of these businesses will have difficulty collecting receivables because no one can pursue a payment that is past due from five years ago. Currently, the assets that are left are the most difficult to exploit because of promoters who want to exploit weaknesses in the system and take advantage of them, and these delays are making matters worse. According to Hari Hara Mishra, director of UV ARC Ltd., to improve the effectiveness of the Corporate Insolvency Resolution Process, the focus of the government should be to fill open positions on various benches, expedite procedures for prompt disposal, place more focus on pre-packaged resolution, push for guarantee enforcement, and maximise the value of distressed assets through pre-packaged resolution.


1. WORLD BANK, (October 24, 2019)

2. M.S. Sahoo, We must assess IBC’s success in relation to its objective, which is reorganisation, THE WEEK,

3. CRISIL, (November 03, 2021)

4. FORTUNE INDIA, (October 29, 2021)

5. Joel Rebello, IBC led recoveries fall sharply as delays mount, (March 04, 2022, 06:29 AM), THE ECONOMIC TIMES,

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