“We must acknowledge some concerns regarding the present functioning of the IBC, indicating a need for a second generation of reforms. Analysis of IBBI’s own data shows that insolvency resolutions at the National Company Law Tribunal (NCLT) averaged 716 days in FY24, up from 654 days in FY23. More concerning is the average time taken for the admission of cases, which stood at 468 days in FY21 and increased to 650 days in FY22,” Kant said.

He noted there is an inverse relationship between the time taken for resolution and the value recovered, highlighting that delays are eroding creditor recoveries. He added the rate of recovery for creditors as a percentage of admitted claims fell to 27 per cent in FY24 from 36 per cent in FY23. As a solution, Kant proposed outsourcing court management to private players, like in the case of Passport Seva Kendras that are operated by Tata Consultancy Services Ltd.

“It is often said that justice delayed is justice denied. We need a breakthrough idea to fix this and there is a need for tribunal process re-engineering. It is essential to minimise judicial bandwidth on administrative matters while opening non-court functions to innovative non-sovereign or private players to deploy technology for improved court management,” he said.

“For example, the privatisation of Passport Seva Kendras has resulted in a seamless process and similar models could work for court processes… With investments in private capital and future-ready innovation, judicial process re-engineering could enhance the administration of justice in India,” Kant added.

He also said that recent NCLT rulings under the IBC “have deviated from the established position”, especially with respect to the supremacy of the commercial wisdom of the Committee of Creditors (CoC), the established waterfall of dues with the state’s dues being subordinated, and the requirement of NCLT to admit a petition when a financial debt exists without exercising any measure of discretion. He said proposed amendments should work towards “clarifying ambiguity on key legal principles”.

Kant also stressed the need for implementing a cross-border insolvency framework as Indian companies enter global value chains.

“Sections 234 and 235 of the IBC provide only an enabling framework for cross-border insolvency, which is yet to be acted upon… There have been innovations like the protocol for cooperation established in the Jet Airways case, but with India becoming an integral part of global value chains, we will ultimately need a model law on cross-border insolvency,” he said.

Kant added that the government is already considering an amendment to the IBC wherein the Record of Default (RoD) certificate issued by the National E-Governance Services Ltd (NeSL) would be sufficient to substantiate default without any further deliberation.

“I understand that a comprehensive review of the IBC was undertaken last year and amendments are under consideration of the government. These amendments are expected to reduce delays and increase the recovery of creditors,” he said.

At IBBI’s 8th annual day, chairperson Ravi Mital also addressed the issue of delays and substantial haircuts faced by creditors. “We did a study in our office and found that when cases are admitted into IBC, they have already lost more than 50 per cent of their value. Now, IBC is not responsible if the creditors bring the cases late. IBC is responsible once a case is brought before IBC, and if you look at recovery as a percentage of fair value, we recover 84 per cent,” he said.

Mital also said time is taken under the IBC because it is a creditor-led model as opposed to a debtor–led model, because of which “the debtor tries his best to ensure that the case is not admitted”.

As of June 30, 7,813 corporate insolvency proceedings were admitted under the IBC, of which 2,547 cases (33 per cent) ended in liquidation, 1,005 cases (13 per cent) were resolved, 1973 cases (25 per cent) are ongoing, and the remaining were either withdrawn or closed.