The Insolvency and Bankruptcy Code, 2016 (IBC)
The IBC was introduced as one of India’s most significant economic reforms with the goal of structuring and expediting insolvency resolution processes. Despite initial optimism, various issues have emerged, particularly concerning institutional capacity and procedural efficiency.
Supreme Court Judgment on Jet Airways
The Supreme Court case of Jet Airways highlighted structural deficiencies in India’s insolvency regime, emphasizing inefficiencies and inadequacies in the performance of the National Company Law Tribunal (NCLT) and its appellate body, National Company Law Appellate Tribunal (NCLAT).
Challenges Facing NCLT and NCLAT
- Institutional Structure: Based on outdated economic realities, rendering them inadequate for current demands.
- Delayed Resolutions: Average resolution time increased to 716 days in FY2023-24 from 654 days in FY2022-23.
- Qualitative Limitations: Members often lack the necessary domain knowledge for complex insolvency matters.
- Administrative Hurdles: Ineffective systems for urgent listings and registry staff wielding excessive control over case listings.
- Judicial Overreach: Instances of NCLT and NCLAT members ignoring Supreme Court orders.
Recommendations for Improvement
- Appointment Process: Implement a hybrid model valuing both judicial experience and domain expertise.
- Procedural Innovations:
- Adopt mandatory mediation before insolvency applications.
- Create specialized benches for different case categories to enhance efficiency and expertise.
- Infrastructure Development: Ensure adequate courtrooms and qualified, permanent support staff.
- Broad Framework Evolution: Move beyond debt resolution to drive economic rejuvenation and attract foreign investment.
The necessity is for a bold reimagining of India’s insolvency regime, ensuring it serves as a proactive force for economic growth and stability.
