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Informist, Thursday, Jan. 29, 2026

 

NEW DELHI – Noting that it will take nearly 10 years for various benches of the National Company Law Tribunal to clear 30,600 pending cases at the current disposal rate, the Economic Survey 2025-26 (Apr-Mar) tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday called for enhancing the effectiveness of the insolvency framework to accelerate recovery timelines. Such extended timelines can trigger value erosion by way of deterioration in assets, departure of employees, shift of customers to competitors, and break down in relationship with suppliers, the document stated.

 

The Insolvency and Bankruptcy Code mandates insolvency resolution completion within 330 days, including extensions. However, the actual average duration was 713 days overall and 853 days for cases closed in the financial year 2024-25. This represents a deviation of over 150% from the statutory limit, said the survey.

 

According to the survey, there lies an institutional constraint both at the level of tribunals as well as the level of resolution professionals. Only 30 National Company Law Tribunal benches handle cases across the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013, and resolution professionals are also in short number, said the survey. Of 4,527 registered resolution professionals, only 2,198 hold active authorisation for assignment, it added.

 

The survey highlighted low performance in the pre-packaged insolvency resolution process that was introduced in 2021 to provide simpler, faster, and less costly resolution. The survey said that the pre-packaged insolvency resolution process has seen only 14 insolvency admissions in four years. The reasons behind the low take-up include procedural complexity that is inappropriate for the target segment, lack of awareness among micro, small, medium enterprises promoters and lenders, trust deficits regarding debtor-led processes, and the inability of small enterprises to fund the process, said the survey.

 

Further, the survey quoted S&P Global Ratings as saying that average recovery rates have improved to around 30% from 15-20% under the pre-insolvency law regime, while resolution timelines have reduced from six to eight years to about two years. Over time, the resolution-to-liquidation ratio has improved from 20% in FY18 to 91% in FY25, according to the survey.

 

The government had introduced the Insolvency and Bankruptcy Amendment Bill, 2025, in August, which proposed a range of measures aimed at addressing procedural delays within the system. It also proposed a framework for cross-border insolvency proceedings. The Bill was referred to a select committee, which had submitted its report in December. While the previous decade offered testament to Insolvency and Bankruptcy Code's legal framework and design, the next phase of the insolvency law should combine process reform with a rapid scaling of capacity, the Economic Survey said.  End

 

Reported by Surya Tripathi

Edited by Nishant Maher

 

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