6 months ago
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The Insolvency and Bankruptcy Code (IBC) has truthful acold played a important relation successful enhancing India’s easiness of doing business, but contempt its successes, determination are “persistent and systemic challenges” that undermine its optimal performance, the Parliamentary Standing Committee connected Finance has said.
In its ‘Review of Working of Insolvency and Bankruptcy Code and Emerging Issues’ study submitted to Parliament connected Tuesday, the Standing Committee connected Finance said that the efficacy of the IBC tin beryllium seen successful the information that a full of 1,194 companies person been successfully resolved nether the its framework.
It added that creditors person recovered implicit 170% of the liquidation worth and much than 93% of the just worth of these companies.
“Despite these undeniable successes, the Committee explicit profound interest implicit persistent and systemic challenges that importantly undermine the Code’s optimal performance,” the study said.
Slow processes
“These challenges see protracted delays successful proceedings, an excessive load of litigation straining adjudicating authorities, contentious issues surrounding excessive haircuts for creditors, and the incomplete implementation of cardinal frameworks, specifically the idiosyncratic insolvency model and the pre-packaged mechanics for MSMEs,” it added.
The study further said that the Committee peculiarly took enactment of the information that the dilatory admittance of insolvency applications continues to impede accelerated worth realisation and leads to the deterioration of assets, and besides importantly leads to delays successful resolution.
The Committee did enactment that a batch of the shortcomings of the IBC process person been sought to beryllium addressed successful the government’s Insolvency and Bankruptcy Code (Amendment) Bill 2025.
However, it besides highlighted that the mean clip taken for the closure of the Corporate Insolvency Resolution Process (CIRP) is presently 713 days, arsenic compared to the mandated 330-day timeline.
How to trim delays
“The Committee observe that these excessive delays are chiefly caused by a terrible shortage of NCLT benches, vacant judicial and administrative unit positions, and wide frivolous litigation and appeals by promoters oregon unsuccessful solution applicants, which erodes plus value,” the study said.
Towards addressing this, the Committee recommended that the government’s connection to acceptable up further National Company Law Tribunal benches beryllium expedited and that the Ministry of Corporate Affairs accelerate the operationalisation of the projected Integrated Technology Platform (iPIE) for centralised lawsuit management.
“To deter vexatious challenges, the Committee further urge that the IBBI [Insolvency and Bankruptcy Board of India] prescribe a mandatory upfront threshold deposit for unsuccessful solution applicants filing appeals, and the minimum punishment for frivolous applications should beryllium substantially raised,” the study said.
Low recovery
The Committee made enactment of the information that, portion creditors retrieve astir 170% of the liquidation worth of the stressed assets, the wide betterment is 32.8% of the full admitted claims, “indicating a important shortfall mostly owed to firms entering the IBC erstwhile assets are already heavy stressed”.
It said that the betterment is constrained owed to the valuation of assets based connected their liquidation imaginable alternatively than their endeavor value, and by a constricted excavation of prime solution applicants. It added that valuation is simply a interest owed to the “lack of transparency and accountability successful the process”.
