Mon. Dec 2nd, 2024

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MUMBAI: Recoveries from personal guarantees, averaging in low single digits so far, are likely to rise significantly following the recent Supreme Court ruling, affirming the validity of the IBC provisions regarding personal guarantees, according to a report. According to a Care Edge report on Tuesday, recoveries from personal guarantees are a low 5.22 per cent now, and the recent apex court ruling implies that personal assets of guarantors can now be utilised to recover outstanding debt.
The ruling came in after more than 200 petitions filed by personal guarantors who challenged the legality of these provisions.
Since FY20, 284 cases involving personal guarantors worth Rs 17,974.2 crore were admitted but the recovery from the same was only 5.2 per cent or Rs 91.27 crore. These cases involved a total demand of Rs 1,45,942.6 crore. The recovery is slow, as only 21 of these 200 cases have yielded approval for repayments.
Meanwhile, inordinate delays continue to plague the resolution process as of the over 2,000 ongoing cases, the delay has been more than 270 days. In percentage terms, as much as 67 per cent of the cases are delayed as of September 2023, compared to 73 per cent in September 2021 and 63 per cent in September 2022.
When it comes to liquidation, the total admitted claims of financial creditors were Rs 65,246.6 crore from which they could recover only Rs 9,456.8 crore.
Meanwhile, the overall recovery rate till Q2 FY24 was 31.85 per cent, implying a haircut of around 68 per cent for the lenders and the cumulative recovery rate has been on a downtrend, decreasing from 43 per cent in Q1 FY20 and 32.9 per cent in Q4 FY22 as larger resolutions have already been executed and a significant number of liquidated cases were either BIFR cases and/or defunct with high-resolution time, the report noted.
After slowing in the pandemic periods of FY21 and FY22, the number of insolvency cases has increased by around 19 per cent in Q2 FY24 even as the number of cases admitted continued to be lower compared to earlier quarters in FY20.
The overall recovery rate till Q4 FY22 was 32.9 per cent, and the same for Q2 FY24 was 33.01 per cent, which means that the creditors have been forced to take a haircut of around 68 per cent on admitted claims.



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