Insolvency and Bankruptcy Code (IBC) Reforms

The Parliamentary Standing Committee on Finance has recently deliberated on setting up a dedicated National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) specifically for IBC-related cases. This comes ahead of proposed amendments to the IBC in the upcoming Monsoon Session of Parliament.

Why Reforms Are Urgent

• Delays Continue to Undermine IBC Objectives:
  • IBC’s original aim was to resolve insolvencies within 330 days.
  • Yet, resolution cases took an average of 597 days (as per IBBI data till March 2025).
  • Liquidation cases took 508 days on average.
  • The Supreme Court’s verdict in the Bhushan Power and Steel case, which overturned a resolution plan, adds uncertainty to outcomes.
• Capacity Constraints at NCLT/NCLAT:
  • The current tribunals handle both company law and IBC matters, leading to severe backlog and inadequate focus.
  • No significant institutional expansion has accompanied their expanding mandate.

Proposed Solutions

• Establish Dedicated IBC Tribunals:
  • A separate set of NCLT and NCLAT benches exclusively for insolvency matters could streamline case flow and reduce pendency.

• Rapid Capacity Expansion:
  • Immediate recruitment of more judicial and technical members.
  • Increase infrastructure, digitisation, and case management tools.

• Legislative Clarity and Certainty:
  • Amendments must prevent reversal of resolution plans years later, ensuring finality and investor confidence.
  • Clear rules on admission timelines, withdrawals, and valuation norms are needed.

BS