The Standing Committee on Finance, headed by BJP lawmaker Bhartruhari Mahtab, has recommended that fast-track Tribunals with strict timelines be set up for high-priority cases in the Insolvency and Bankruptcy Code (IBC). 

Corporate Affairs Ministry (MCA) should also consider adopting an  urgent list system for insolvency cases, similar to the UK, to prioritise time-sensitive matters, the Parliamentary Panel suggested in a report tabled in Lok Sabha last week. 

The Parliamentary Panel also wants MCA to Provide clearer guidelines on treating government dues, especially taxes and penalties, ensuring equitable and transparent resolution of government claims.

In another recommendation, the Standing Committee has recommended introducing a provision under the IBC, similar to Article 226(3) of the Constitution, mandating the processing of applications within 14 days. This will help address excessive delays, which currently extend to over two years, and ensure timely resolution of cases, it added. 

Resolution Professionals standards

On Resolution Professionals, the Parliamentary Panel has stressed enhancing RP standards with rigorous certification, specialised training, and independent performance reviews, particularly for high-stakes cases. 

A dual oversight system involving IBBI and external experts can improve RP regulation, the Panel report suggested. 

The Standing Committee has suggested that Public-Private Partnership (PPP) models be explored to improve judicial processes, drawing on the success of privatised Seva Kendras. Private investments in technology can modernise infrastructure and enhance case resolution speed, the Panel report said. 

The panel report added that the government should also ensure NCLT members and adjudicating bodies possess specialised knowledge, as highlighted in the Supreme Court’s Finolex Industries case, for better decision-making in complex insolvency cases. 

By addressing delays, competency gaps, and broadening stakeholder engagement, along with leveraging technology and domain expertise, the IBC can further enhance its impact on India’s economy, ensuring faster resolutions and boosting investor confidence, the Panel report added. 

The Committee acknowledges that implementing IBC has made significant strides in improving the resolution of distressed corporate assets in India. 

Over the years, the IBC has enhanced credit discipline and facilitated a transparent and efficient resolution process, underscoring its role in fostering economic stability. 

The recovery of over ₹3.5 lakh crore for creditors exemplifies the Code’s success in achieving its primary objective. Furthermore, the IBC has enabled the revival of unproductive assets, turning them into productive contributors to the economy, which is a testament to its far-reaching impact. 

However, the Committee observed persistent challenges hinder its full effectiveness. 

Notably,  investigations and 166 show-cause notices against Resolution Professionals (RPs) highlight competence and conduct issues, and nearly 64 per cent of CIRPs exceed the statutory 330-day limit, causing delays. The Committee noted that the lack of clarity on Government creditors’ claims and issues around stakeholder representation further dilute the Code’s efficiency. The Committee feels that the rising costs of CIRPs and frequent litigation by stakeholders exacerbate delays, frustrating the intended outcomes of the IBC. 

NCLT case delays

The Committee observed that delays in the insolvency resolution process, particularly at the admission and adjudication stage at the National Company Law Tribunal (NCLT), remain a significant bottleneck. 

The Committee noted that despite the IBC’s intent to ensure time-bound resolutions, the average timeframes for resolving cases have been increasing steadily. 

These delays impact creditors’ recovery values and affect stakeholders’ confidence in the efficiency of the insolvency framework. 

The Panel, therefore, believes that addressing procedural inefficiencies and capacity constraints in adjudication is critical to achieving the IBC’s objective of expeditious and effective resolution.