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Informist, Wednesday, Oct. 1, 2025

 

NEW DELHI – The Insolvency and Bankruptcy Board of India Chairperson Ravi Mittal Wednesday said that it will take two to three months to implement the Supreme Court's direction on Insolvency and Bankruptcy Code, 2016 reforms. Mittal said that the government was very serious on the issue highlighted by the top court and had already started working on the court's directions. He was speaking at the Insolvency and Bankruptcy Board of India's 9th annual day celebrations in New Delhi.

 

Last month, the apex court had directed a bunch of insolvency reforms in the Insolvency and Bankruptcy Code, 2016 "to restore faith in the regulatory and insolvency framework, deter speculative misuse, and ensure that the dream home of India's citizens does not turn into a lifelong nightmare". Since real estate is the second largest sector in insolvency proceedings, Insolvency and Bankruptcy Board of India, in consultation with real estate authorities, shall constitute a council to frame specific guidelines for insolvency proceedings in real estate, including timelines for project-wise insolvency, and safeguards for allottees, said the court. Resolution of real estate insolvency should, as a rule, proceed on a project specific basis rather than the entire corporate debtor, unless circumstances justify otherwise, the court had said.

 

The top court had asked the government to fill vacancies in National Company Law Tribunal and National Company Law Appellate Tribunal "on a war footing". Dedicated insolvency and bankruptcy benches with additional strength be constituted, said the court, adding that the services of retired judges may be utilised on ad hoc basis until regular appointments are made. 

 

On Wednesday, Justice Ashok Bhushan, the chairperson of the National Company Law Appellate Tribunal highlighted the challenges faced under the current insolvency law. Bhushan said that the corporate insolvency resolution process takes much longer to complete than the given statutory timeline of 330 days in the insolvency law. Bhushan said about the backlog of cases in the National Company Law Tribunal and the National Company Law Appellate Tribunal. He said that the tribunals and appellate tribunal often operate under capacity constraints with less number of judges. He said that the government and other stakeholders must not rest on past achievements and instead address challenges of backlog and delay in insolvency process. 

 

As a solution, Bhushan said that institutional capacity should be strengthened and additional tribunal benches be established for a limited period to clear backlogs. In the long term, the government must consider creating dedicated insolvency benches where the officials and judges were staffed and trained exclusively for insolvency matters. "We must have dedicated procedural rules for insolvency rather than borrowing from the general company law framework. We must also improve speed and efficiency, the e-courts platform must be upgraded to a new version with AI (artificial intelligence) assisted case management," said Bhushan. 

 

Bhushan said that due to the rise of globalisation, cross border insolvency cases have increased, which necessitates a harmonised international framework to address jurisdictional challenges. Cross-border insolvency regulates the treatment of financially distressed debtors where such debtors have assets or creditors in more than one country. In addition, Bhushan said that maximising value from distressed assets should remain a key focus for the government. 

 

Bhushan said that Section 29A of the Insolvency and Bankruptcy Code, 2016, which bars errand promoters from re-entering through back doors must be further strengthened to prevent proxy participation. Section 29A of the 2016 Code serves as a "gatekeeper" provision, outlining a list of individuals and entities ineligible to submit a resolution plan to a corporate debtor. Its core objective is to prevent those who contributed to a company's failure, such as wilful defaulters, or those with significant financial mismanagement, from regaining control of the business through the insolvency process. 

 

He said that Section 32(A) of the 2016 Code, which gives the new management a clean slate, must be carefully implemented to prevent misuse. Section 32A of the 2016 code provides immunity to a corporate debtor and its property from prosecution for any offence committed prior to the commencement of the insolvency process, provided a resolution plan is approved and there is a change in control of the corporate debtor to a person not involved in the offense.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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