India's Bankruptcy Law: Will Reforms Finally Speed Up Crippling Delays?

India's Insolvency Code: The Persistent Problem of Delays\n\nThe Insolvency and Bankruptcy Code, 2016 (Code) was enacted with the promise of time-bound and value-maximizing corporate resolutions. However, recent data indicates that the 'way' the process functions is struggling to keep pace with the 'will' to resolve, leading to significant delays.\n\n### Average Resolution Times Remain High\n\n Published data from the Insolvency and Bankruptcy Board of India (IBBI) for the July-September 2025 quarter reveals that approximately 1,300 resolved Corporate Insolvency Resolution Processes (CIRP) took an average of 603 days.\n This average excludes periods formally set aside by adjudicating authorities for litigation and other acknowledged delays, suggesting the actual resolution time might be even longer.\n\n### Roots of the Delays\n\nSeveral interlocking factors contribute to the protracted timelines, even when stakeholders are willing to move forward:\n\n Strategic Litigation: Promoters, often reluctant to lose control, and sometimes unsuccessful resolution applicants or creditors, resort to appeals, interim applications, and late-stage settlement proposals. These tactics are frequently used to halt or slow down the CIRP.\n Procedural Non-Compliance: Despite clear timelines outlined in the Code and its regulations, delays occur in stages like collation, verification, and preparation of the information memorandum. Extensions for submitting bids also contribute to overall slippage.\n Adjudicatory Infrastructure Gaps: The National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) face heavy cause lists, limited benches, and a broad range of matters beyond insolvency, leading to significant case pendency and adjournments.\n Inconsistent Interpretations: Divergent legal interpretations across different tribunal benches create uncertainty and encourage appeals, delaying finality.\n Committee of Creditors (CoC) Delays: The CoC can struggle to reach consensus, leading to re-runs of bidding processes or requests for revised bids, which extend timelines.\n Statutory Approvals: While exceptions exist, obtaining necessary approvals, such as from the Competition Commission of India (CCI), can still add time to the resolution process.\n\n### Path to Improvement\n\nAddressing these delays requires a multi-pronged approach:\n\n Stricter Adherence to Timelines: Stronger consequences for non-compliance are needed, moving beyond routine exclusion applications.\n Infrastructure Enhancement: Establishing additional benches and members for NCLT and NCLAT, coupled with streamlined case management and integrated technology platforms (like iPIE), is crucial.\n Harmonized Interpretations: Consistent legal interpretations would reduce the appellate burden.\n Discouraging Bid Re-runs: Iterative bid re-runs that extend beyond statutory windows should be discouraged as they often destroy value.\n Parliamentary Committee Recommendations: The recent report from the Twenty Eighth Parliamentary Standing Committee proposed measures such as immediate online 'no dues' certificates, penalties for non-compliance, mandatory upfront deposits for appeals by unsuccessful resolution applicants, valuing assets based on 'enterprise value' instead of 'liquidation value', introducing an advance ruling mechanism, and exploring mediation.\n\n### Conclusion\n\nFor the Insolvency and Bankruptcy Code to truly deliver on its promise, time must become a hard constraint. Swift and certain resolution, backed by robust infrastructure and consistent decision-making, is key to maximizing value and preserving viable enterprises.\n\n### Impact\n\n The persistent delays in the insolvency resolution process can lead to significant value erosion for distressed companies, impacting creditors, employees, and shareholders. This inefficiency can also affect overall credit availability and investor sentiment in India. Reforms aimed at speeding up resolutions could improve the ease of doing business and the efficiency of capital markets.\n Impact Rating: 7/10\n\n### Difficult Terms Explained\n\n Insolvency: A state where a person or company cannot pay their debts.\n Insolvency and Bankruptcy Code, 2016 (Code): A law in India that consolidates and amends laws relating to reorganisation of an individual or corporate debtor and insolvency resolution.\n Corporate Insolvency Resolution Process (CIRP): The formal legal process under the Code to resolve insolvency for a corporate entity.\n IBBI: Insolvency and Bankruptcy Board of India, the regulatory body for insolvency professionals and agencies.\n Adjudicating Authority: The judicial body (primarily NCLT) that presides over insolvency cases.\n NCLT: National Company Law Tribunal, the primary judicial body for corporate insolvency in India.\n NCLAT: National Company Law Appellate Tribunal, the appellate body for NCLT orders.\n Promoters: The individuals or entities who originally founded or control a company.\n Resolution Applicant (RA): An entity or person who proposes a plan to rescue a corporate debtor.\n Committee of Creditors (CoC): A group of financial creditors who make key decisions regarding the resolution of a corporate debtor.\n Liquidation Value: The estimated value of a company's assets if it were to be wound up and sold off piecemeal.\n Enterprise Value: A measure of a company's total value, often used to assess its worth as a going concern, considering its market capitalization, debt, and cash.\n Waterfall Mechanism: A distribution mechanism that prioritizes claims of creditors in a specific order, as defined by law, during liquidation or resolution.