A high-powered parliamentary committee has called for a strict three-month deadline for the National Company Law Appellate Tribunal (NCLAT) to decide appeals in bankruptcy cases, aiming to inject speed and certainty into India's corporate rescue framework.
Strict Timelines for Appellate Tribunal to Curb Delays
The Lok Sabha select committee, reviewing the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, emphasized that timely decisions at the appellate level are critical for the rapid resolution of financially distressed companies. The committee, chaired by Bharatiya Janata Party MP Baijayant Panda, submitted its report to the Lok Sabha on Wednesday.
The original bill proposed a 14-day window for the National Company Law Tribunal (NCLT) to admit bankruptcy cases but was silent on deadlines for the appellate stage. The panel noted that the absence of statutory timelines for NCLAT has led to significant holdups, especially in appeals against the rejection of claims or resolution plans.
"Noting that undue appellate delays risk undermining the efficiency and certainty of the insolvency resolution process, the committee recommended that NCLAT 'shall dispose of an appeal within three months from the date of its receipt,'" the report stated.
Bar on Resolution Professionals Turning Liquidators
In a major governance reform, the select committee recommended that resolution professionals (RPs) managing a distressed company should be prohibited from becoming its official liquidator if turnaround efforts fail.
The committee identified a "perverse incentive" in the current system. While a resolution professional draws a fixed fee, a liquidator's compensation is often a share of the sale proceeds from winding up the company. This could potentially motivate an RP to steer a company towards liquidation rather than revival.
The bill had initially proposed allowing creditors to vote on appointing the same RP as the liquidator. However, the committee rejected this. Instead, it recommended that tribunals should ask the regulator, the Insolvency and Bankruptcy Board of India (IBBI), to recommend a liquidator who was not the resolution professional for that specific company.
Endorsement of Futuristic Reforms and Recovery Measures
The committee strongly backed the bill's forward-looking provisions, including frameworks for handling group insolvency (involving multiple entities within a corporate group) and cross-border insolvency cases with assets and creditors across jurisdictions.
Legal expert Manmeet Kaur, partner at Karanjawala & Co., highlighted that the bill introduces a Creditor-Initiated Insolvency Resolution Process (CIIRP). This out-of-court mechanism aims for cost-effective resolution of genuine business failures with minimal court intervention.
The panel also endorsed provisions allowing administrators to review suspicious transactions by the defaulting management from two years before the first insolvency application was filed, not just from the date of admission by NCLT. This change addresses delays in case admission that often hinder recovery from dubious pre-bankruptcy deals.
Furthermore, creditors will get the right to initiate recovery from such "avoidance transactions" if the resolution professional fails to act.
The select committee examined a total of 68 amendments aimed at strengthening the insolvency ecosystem by reducing delays, maximizing value for stakeholders, and enhancing transparency. An anonymous source familiar with the deliberations said the report adopts a balanced approach, reinforcing the IBC's role in improving the ease of doing business and ensuring economic stability.
The government has listed the amendment bill for passage in the ongoing winter session of Parliament, though time is short as the session concludes on Friday.
