Tribunals, tech support to make IBC smarter and faster in resolution: Experts on Budget proposal

While the tech innovation is a positive step, Chand highlighted that this does not lead to more operational ease and there is a need to enhance the insolvency process.

The budget proposal to set up additional tribunals and integrated technology system for the Insolvency and Bankruptcy Code (IBC) will make the process more effective and help solve cases faster, industry experts said.

“The announcement to set up an integrated tech platform under the IBC will enhance the efficiency and effectiveness of the insolvency resolution process in India. This initiative is poised to bring greater consistency, transparency, and better oversight for all stakeholders, including the National Company Law Tribunal (NCLT),” said Mukesh Chand, senior counsel at Economics and Laws Practice.

Natasha Treasurywala, partner at Desai & Diwanji, said that the NCLT is constantly riddled with delays and having additional tribunals for IBC-related matters is the need of the hour. “Amendments to the IBC which result in quick handling and disposal of matters is a very positive development,” she said.

While the tech innovation is a positive step, Chand highlighted that this does not lead to more operational ease and there is a need to enhance the insolvency process. "Several challenges persist that need immediate attention to ensure the IBC functions as a genuine resolution mechanism rather than merely a recovery tool. One of the primary concerns is the varying approach among tribunal members. Expertise in finance, market dynamics, and economic sensitivity is crucial to adjudicating complex insolvency matters effectively," Chand said.

Finance Minister Nirmala Sitharaman in her budget address said that the government will develop additional tribunals and integrated technology system for IBC. “Appropriate changes to the IBC to be initiated and additional tribunals to be established. The government will set up an integrated technology system for the IBC for better outcomes,” she said on July 23.

She mentioned that cases of more than 1,000 companies have been dissolved through the insolvency route, resulting in direct recovery of Rs 3.3 lakh crore.

On February 25, 2015, in the Union Budget 2015-16, then Finance Minister Arun Jaitley had announced the formation of a comprehensive bankruptcy code of global standards. Jaitley had introduced the Insolvency and Bankruptcy Code, 2015, in the sixteenth Lok Sabha.

Even after seven years since the launch of the IBC, the recovery of loans resolved through insolvency courts remains low even as the number of cases being admitted is on the rise.

A report by the ratings agency CareEdge showed that the number of cases in April-June FY24 jumped to 6,815, compared to 5,250 a year before. In the same period, data from some of the top lenders showed that recovery has been following a downtrend on a year-on-year (YoY) basis.