Concerns about delays in case admissions under the insolvency law have been raised. NCLT President, Chief Justice Retd Ramalingam Sudhakar, highlighted the need for more personnel. Despite current limitations, he remains optimistic about achieving success. The National Company Law Tribunal (NCLT) plays a crucial role in enforcing the Insolvency and Bankruptcy Code (IBC).

Sudhakar pointed out that banks and financial institutions often submit petitions with extensive documentation, sometimes spanning 20-30 volumes. He explained that interpreting these documents involves legal arguments. “Please don’t imagine that NCLT can do some magic by saying admit debt and default… we can’t,” he stated regarding delays in admitting cases under the IBC.

Need for Reforms and Manpower

Speaking at the eighth foundation day of the Insolvency and Bankruptcy Board of India (IBBI) in New Delhi, Sudhakar emphasized the necessity for additional members and judges. He has repeatedly requested more resources from both the ministry and Parliament. “No offence, I am telling you a simple thing, give me the numbers, I will give you the result,” Sudhakar asserted.

Amitabh Kant, India’s G20 Sherpa and former Niti Aayog CEO, acknowledged concerns about the current functioning of the IBC. He suggested that a second generation of reforms is needed. An analysis of IBBI’s data shows that insolvency resolution at NCLT averaged 716 days last fiscal year, up from 654 days in 2022-23.

Proposed Amendments and Future Outlook

The average time for case admission increased from 468 days in 2021 to 650 days in 2022. Kant mentioned an amendment to the Code is being considered. This amendment would allow defaults recorded by an information utility to be sufficient for substantiation without further deliberations, potentially speeding up admissions.

Kant also advocated for a model law on cross-border insolvency. He praised the progress made over eight years with the IBC but stressed that continuous dialogue, collaboration, and innovation are vital for strengthening India’s insolvency framework.

Economic Implications and Market Development

Chief Economic Advisor V Anantha Nageswaran noted that a robust bankruptcy regime acts as a safety net during economic downturns. It reduces the need for costly macroprudential interventions. A continually evolving IBC framework is essential for India to achieve a 7-8 per cent growth rate over the next decade.

Nageswaran added that an orderly resolution framework would mitigate credit cycle volatility in India. The IBC has resolved banks’ and corporates’ balance sheet issues since its implementation in this millennium’s second decade.

An effective bankruptcy resolution is crucial for bond investors’ confidence in India. Currently, highly rated bonds dominate over 85 per cent of issuances. Developing a deep market for lower-rated bonds requires investor trust in bankruptcy resolutions.

Nageswaran believes the current IBC regime will help develop India’s bond market with a broader range of credit ratings in future years.

IBBI Chairperson Ravi Mital reported that lenders have recovered Rs 3.5 lakh crore through resolving stressed assets under the IBC over eight years.