Govt proposes amendments to IBC for better outcomes, more NCLT benches to be added

In March the Union Cabinet approved the development of two new Delhi Metro corridors for a project cost of around Rs 8,600 crore.

Finance Minister Nirmala Sitaraman, in her budget speech on July 23,  proposed an amendment to the Insolvency and Bankruptcy Code (IBC), 2016 for better outcomes of insolvency cases filed against companies.

In order to unclog the National Company Law Tribunal (NCLT), which has been facing criticism over delays. These new benches will will exclusively hear cases filed under the companies act, 2013.

Government has also announced the introduction of an integrated technology platform for the IBC.

FM said that over Rs. 3.3 lakh crore has been recovered via IBC and over 28000 cases have been disposed off so far.

The NCLT is tasked with hearing cases filed under both IBC and companies act, which results in large pendency of cases. Thus, increasing the benches and having exclusive benches for company law cases are expected to reduce the pendency.

The IBC was introduced to strengthen the corporate insolvency regime. The code introduced timeframes for resolving corporate insolvencies. The survey revealed that the eight years since it was introduced in 2016, 31,394 corporate debtors involving a value of Rs 13.9 lakh crore have been disposed of (including pre-admission case disposals) as of March 2024.

The Economic Survey of India, released on July 22, revealed that over 3000 companies have emerged out of the Corporate Insolvency Resolution Process (CIRP) as of March 2024. IBC, which was introduced in 2016, uses the CIRP to resolve and rescue a company from its financial burdens.

The Survey said "IBC has facilitated the successful closure of 4,131 CIRPs until March 2024. 3,171 corporate debtors have been rescued, of which 947 cases have been resolved through approved resolution plans, which brought in a realisable value of Rs 3.36 lakh crore."

According to the Survey, creditors recovered approximately 32 per cent of their claims in these case. This amounted to a recovery of 85 per cent of the fair value and 162 per cent of the liquidation value of asset.

"More significant to the real sector is that over 3,000 businesses have emerged out of the CIRP, with continued business operations extending the productive use of resources trapped due to financial distress in these corporate debtors," the survey said.