To enhance the effectiveness of insolvency proceedings, the government plans to establish an integrated technology platform for stakeholders and increase the number of benches at the National Company Law Tribunal (NCLT)
Presenting the 2024-25 Budget, Finance Minister Nirmala Sitharaman announced on Tuesday that necessary amendments will be made to the Insolvency and Bankruptcy Code (IBC).
The IBC, which was enacted in 2016 and has undergone six amendments so far, aims to provide a market-linked and time-bound resolution for stressed assets. “An Integrated Technology Platform will be created to improve outcomes under the Insolvency and Bankruptcy Code (IBC), ensuring consistency, transparency, timely processing, and better oversight for all stakeholders,” Sitharaman stated.
The Finance Minister highlighted that the IBC has successfully resolved over 1,000 companies, resulting in a direct recovery of ₹3.3 lakh crore for creditors. She also mentioned that 28,000 cases, involving more than ₹10 lakh crore, have been settled even before admission.
Furthermore, efforts are underway to enhance the tribunals to ensure a faster resolution process under the insolvency framework. “Necessary changes to the IBC, reforms, and strengthening of the tribunal and appellate tribunals will be initiated to accelerate insolvency resolution. Additional tribunals will be established, with some being designated to exclusively handle cases under the Companies Act,” Sitharaman explained.
Currently, NCLT has benches in 15 cities, with the principal bench located in the national capital. In addition, the National Company Law Appellate Tribunal (NCLAT) operates benches in Delhi and Chennai. Both NCLT and NCLAT face challenges due to resource constraints.
In her Budget speech, Sitharaman also mentioned that measures would be taken to reinforce debt recovery tribunals. She emphasized the need to set up more tribunals to expedite recovery processes.
The Economic Survey, presented in Parliament on Monday, highlighted that the immediate loss of control after the initiation of the IBC resolution process has prompted debtors to settle with creditors as soon as applications are filed with the NCLT. “A notable achievement is the resolution of ₹10.2 lakh crore in underlying defaults at the pre-admission stage. This shift in debtor behavior has been highly beneficial for banks and other lending institutions,” the survey noted, adding that the government has implemented several initiatives to enhance the insolvency ecosystem.
The IBC has established an “optimal incentive-disincentive mix” to promote transparent dealings in creditor-debtor relations, the survey emphasized.
Additionally, the FY25 budget proposes to accelerate the voluntary closure of limited liability partnerships (LLPs). “The services of the center for processing accelerated corporate exit will be expedited. It will be extended for the voluntary closure of LLPs to reduce the closure time,” the Finance Minister announced in the Budget speech.
Commenting on the measures announced by the Finance Minister, Saurabh Kalia, Secretary of the NCLT Bar Association, said these proposals would significantly enhance the value of NCLT and NCLAT and strengthen the entire corporate jurisdiction under the IBC and the Companies Act. “The budget emphasizes implementing an integrated system for time-bound methodologies and outcomes of NCLT cases, which is a welcome development. This will undoubtedly further reinforce insolvency laws,” he added.
The Finance Minister also placed special emphasis on adding more benches, recognizing the urgent need for NCLT to have more members and benches.
Jidesh Kumar, Managing Partner at King Stubb & Kasiva, Advocates and Attorneys, stated that steps will be taken to strengthen tribunals for the efficient and prompt disposal of IBC-related matters. “An integrated technology platform will be developed to ensure effectiveness, consistency, transparency, and oversight for all stakeholders involved in the IBC process,” he explained.
Discussing the introduction of the technology platform, Shiju PV, Senior Partner at IndiaLaw LLP, said, “Efficient and innovative use of technology is crucial for a time-bound process like the IBC. The introduction of an integrated technological platform is a commendable step towards streamlining the process and achieving faster outcomes. We anticipate the introduction of more NCLT benches to further expedite the process.”
(With inputs from agency)
Share your news, articles, deals, columns, or press releases with us! Click the link to submit and join our platform today.
