New Delhi: Immediate and targeted steps are needed to make India’s Insolvency and Bankruptcy Code (IBC) more effective as systemic problems such as delays due to lack of judges, uncertainty over the finality of resolution plans and lack of accountability among bankruptcy professionals have limited its potential, the Parliamentary Standing Committee on Finance said in a report on Tuesday.
In its report on the functioning of the IBC tabled in the Lok Sabha, the committee led by Bharatiya Janata Party (BJP) MP Bhartruhari Mahtab said that while the code has boosted creditor confidence and encouraged domestic and foreign investment, its potential continues to be limited by lingering systemic issues.
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This, the panel said, requires immediate and targeted intervention across all fronts.
Judicial capacity must be strengthened with new National Company Law Tribunal (NCLT) benches, the accountability of resolution professionals must be fixed by empowering creditors’ panels and streamlining disciplinary measures, and the finality of approved plans must be guaranteed through explicit legislative changes, a parliamentary committee said.
For the avoidance of doubt
The panel added that the procedural ambiguity must be removed by the rules.
“The Committee therefore urges the Ministry of Corporate Affairs to ensure expeditious implementation of these reforms in a manner that fully realizes their intended impact, utilizing the IBC Amendment Act 2025 to realize the full potential of the Code, maximize enterprise value, protect stakeholder interests, promote financial stability and strengthen India’s position as a favorable business destination,” the report said.
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The committee’s recommendation comes as the government works to amend the code. The bill to overhaul the IBC is currently being reviewed by a Lok Sabha select committee headed by BJP MP Baijayant Panda. A revised bill based on the recommendations of this committee is expected to be tabled in Parliament either in the ongoing winter session or next year’s budget session, Mint reported on Monday.
“A sustained, integrated and time-bound approach is essential to ensure that the IBC delivers on its promise of efficient, fair and effective insolvency resolution,” said the panel’s report to Mahtab.
A practical implementation key
Experts pointed out that the report’s findings highlighted the importance needed to improve the practical implementation of insolvency law.
“Currently, delays, conflicting regulations and erratic decisions make the process unpredictable for all parties involved. The committee advocates strengthening the capacity of the NCLT, increased accountability for problem-solving experts and legislative clarity to prevent repeated challenges to approved plans,” said Shankey Agrawal, partner at BMR Legal.
“These revisions are significant because the value diminishes every day when a case remains pending in court. Proper implementation will reduce litigation, speed up business recovery and increase the reliability of the insolvency system for creditors, investors and buyers. If implemented well, they can move IBC litigation from procedural battles to a substantive business resolution,” Agrawal said.
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The overall recovery is only 32.8% of the total admitted creditor claims, indicating a significant shortfall largely caused by firms entering IBCs when assets are already under severe pressure, the report said.
The statutory overlap between the IBC and the Prevention of Money Laundering Act (PMLA) poses a major challenge, the report said.
The simultaneous application of the IBC and the PMLA often creates a conflict, as attachment of assets by the executive directorate can undermine the immunity granted to new management under the IBC, the report said.
