Corporate Insolvency Resolution Process In India - Present Status And Future Trends
Author: LawSphereX
Category: Corporate & Insolvency
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CORPORATE INSOLVENCY RESOLUTION PROCESS IN
INDIA: PRESENT STATUS AND FUTURE TRENDS Prof. (Dr.) Pradip Kumar Das, Professor in the Department of Law and Governance, Central University of South Bihar, Gaya Devesh Kumar, Research Scholar in the Department of Law and Governance, Central University of South Bihar, Gaya
ABSTRACT
The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) has tremendously reformed the landscape of corporate insolvency proceedings in India. The IBC has consolidated all fragmented insolvency laws into an integrated one in India, evolutionizing the resolution across businesses by enhancing creditors’ rights and moving toward a more rescue-oriented approach to resolving distressed corporations. Regulatory authorities, such as the IBBI, NCLT, and NCLAT, play a significant role in administering and adjudicating insolvency matters. They are critical to the operation and balance of the CIRP. Through an in-depth analysis of statutory provisions and case studies, this paper investigates the efficacy of the CIRP and how it defends the interests of several stakeholders, such as creditors, debtors, and shareholders.
Judicial precedents have significantly influenced the interpretation of the IBC and underscore the dynamic nature of the CIRP and its evolution through judicial scrutiny. Moreover, the paper focuses on the necessity to constantly update the regulatory environment and legal framework to alleviate operational challenges, ensure protection to stakeholders, and align with international best practices. Suggestions to make the CIRP more effective include stricter implementation of the IBC, transparent approval processes, and a heavy-duty framework to deal with cross-border insolvency cases.
I.
Introduction
The corporate insolvency regime in India has undergone a significant transformation since the commencement of the Insolvency and Bankruptcy Code, 2016 (IBC) a decade ago. 1 This leap forward has led to the unveiling of the complex aspects of corporate insolvency and the establishment of an effective regime for reorganisation and revitalisation. The Corporate Insolvency Resolution Process (CIRP) framework, which provides a mechanism for the restructuring and turnaround a distressed company, operates in a dynamic environment. 2 The success of the CIRP framework is underpinned by the legal and regulatory mechanisms that support it. The IBC, by consolidating multiple scattered insolvency laws, has created an integrated legislative regime to consolidate the resolution process and protect creditor rights.
3 However, the law surrounding CIRP is not static; it has been dynamically shaped through amendments to the Code, regulation, and judicial interpretations. Judicial interpretations have played a pivotal role in the evolution of CIRP, as courts have clarified the provisions of the IBC and set many principles related to practical applications of the law. 4 The regulatory authorities under the Code, namely, the Insolvency and Bankruptcy Board of India (IBBI), the National Company Law Tribunal (NCLT), and the National Company Law Appellate Tribunal (NCLAT), play a pivotal role in ensuring that the CIRP operates fairly and transparently. 5 This paper reviews the legal and regulatory framework under the CIRP, its development, and judicial interpretation to set the future direction of corporate insolvency laws in India, drawing out lessons for reforms and improvements.
The paper delves into issues that will enhance understanding of the CIRP and its impact on the Indian insolvency regime. II.
Legal Framework
of the CIRP in India A firm, individual, or organisation is considered insolvent where its liability exceeds the asset value;6 in other words, the business finds itself in a situation where it owes more than its assets. Corporate insolvency is the position of a corporation in which it finds itself when its assets fall 1 Kunal Singh & Muskan Singh, Insolvency and Bankruptcy Code (IBC) in India and Its Impact on the Economy,
3 JUS CORPUS L.J. 485 (2023).
2 Partha Banerjee & Aparajita, Bankruptcy Code & Once the Vilified Promoter-Averse Approach, 15 INT’l. IN- HOUSE COUNSEL J. 7881 (2022).
3 Ibid.
4 Vijay Kumar Singh, Modern Corporate Insolvency Regime in India
A Review, 2021 NLS BUS. L. REV. 22 (2021).
5 Ibid.
6 Lynn M. LoPucki, The Death of Liability, 106 YALE L.J. 1 (1996).
short of its liabilities and thereby cannot make payments to its creditors. The evolution of insolvency laws in modern India traces back to colonial-era legislation, such as the Presidency Towns Insolvency Act of 1909 and the Provincial Insolvency Act of 1920. 7 These fragmented laws proved inadequate for modern economic demands. In response, the IBC was enacted in 2016, consolidating and modernising the legal framework to address corporate insolvency more effectively. The IBC has changed the insolvency regime by enabling it in its vision to streamline the resolution process, enforce the creditors’ rights, and adopt a rescue-oriented approach toward failing businesses. 8 Still, the legal conduct associated with the CIRP has also been developed through judicial pronouncements and interpretations.
The judiciary lays down the standards for clarifying the provisions of the CIRP and ensuring the rules and regulations contained in the IBC. 9 Corporate insolvency law protects the interests of the creditors, sustains economic stability, and ensures that financial difficulties within the corporate world are settled with tranquillity. 10 Factors like business restructuring, securities enforcement, anti-competitive practices, etc affect the CIRP. 11 Knowing how these different laws work together is essential to successfully navigating the complexities of corporate insolvency. India’s corporate insolvency legal framework is forward-looking because it is dynamic due to continuous evolvement and improvement.
A comprehensive understanding of the legal framework of corporate insolvency in India requires an examination of its origins, judicial interpretations, interplay with other regulatory frameworks, global norms, and possible modifications. Such an understanding is essential for stakeholders to engage with the CIRP in India and deal with its complexities wisely and efficiently. III.
Regulatory Authorities for the CIRP To maintain impartial and open processes that serve the interests of all concerned stakeholders, regulatory authorities are essential in overseeing and implementing pertinent laws and regulations governing the CIRP. They play a significant role in forming fair insolvency laws 7 Krati Rajoria, Insolvency and Bankruptcy Code of India: The Past, the Present and the Future, 2018 INT’l BUS. L.J. 61 (2018).
8 M. P. Ram Mohan & Vishakha Raj, Pre-Packaged Insolvency Regulation
What Can India Learn from the United Kingdom and the United States?, 29 AM. BANKR. INST. L. REV. 231 (2021).
9 Ibid.
10 Ibid.
11 Ameya Garud, Bid-Rigging in Insolvency Resolution Applications
Harmonizing Competition Law with Insolvency Law, 8 RGNUL FIN. & MERCANTILE L. REV. 123 (2021). and regulations for creditors and debtors to revive the economy. The regulatory bodies involved in case of corporate insolvency under the IBC are as follows: A. Insolvency and Bankruptcy Board of India (IBBI): The IBBI is established under the IBC to manage insolvency proceedings for corporate bodies and individuals. 12 It also contributes to the registration and regulation of insolvency professionals, insolvency professional agencies, and information utilities. The main functions of the IBBI are to formulate and amend legislation and regulations concerning corporate insolvency. 13 It also continuously checks the existing framework’s adequacy to enhance the effectiveness and efficiency of the CIRP.
14 It can oversee and act against all violations by tracking the conduct of insolvency professionals and acting through disciplinary measures in cases of misconduct or failure to adhere to the norms enshrined. 15 B. National Company Law Tribunal and National Company Law Appellate Tribunal: The NCLT and the NCLAT have been established to adjudicate matters of corporate insolvency and restructuring in India and have been widely empowered to maintain procedures to resolve insolvency matters fairly, transparently, efficiently, and expeditiously. 16 The NCLT has been empowered to pass an order to initiate the CIRP and control the liquidation process by approving any resolution plan and ensuring it is done promptly. Similarly, the NCLAT serves as an appellate authority on appeals against the NCLT’s orders for re-evaluation.
17 The NCLAT plays a crucial role in the accountability and transparency of the insolvency process by guaranteeing that the insolvency procedures comply with the prescribed legal and regulatory framework. Both form part and parcel of the regulatory framework for the CIRP toward maintaining general integrity and stability in the insolvency process and, hence, are designed to boost investors; confidence in the insolvency framework. 18 12 Aman Malhotra, Insolvency and Bankruptcy: A Long-Journey of Legislations, 2 JUS CORPUS L. J. 64 (2021). 13 Anurag Agarwal, Changing Dynamics of Corporate Law, and Governance in India: How to Have Effective Implementation of the Insolvency and Bankruptcy Code, 3 J. ON GOVERNANCE 44 (2019).
14 Ibid.
15 Ibid.
16 Akshaya Kamalnath, Corporate Insolvency Resolution Law in India - A Proposal to Overcome the ‘Initiation Problem’, 88 UMKC L. REV. 631 (2020).
17 Ibid.
18 Ibid.
C. Insolvency Professionals: At the initiation of CIRP, an interim resolution professional is appointed to control the debtor’s assets, manage them, and invite claims from creditors. 19 Once appointed, the CoC is responsible for implementing the CIRP and shall ensure compliance with the provisions of the IBC. The CoC will also assist in appraising and selecting the resolution plans. The RP shall prepare an information memorandum comprising relevant information on the debtor’s financial position, business operations, and assets to facilitate decision-making by the CoC and potential resolution applicants. 20 The RP is responsible for calling for, assessing, and submitting resolution plans to the CoC for processing, ensuring that such plans adhere to all requirements set across the IBC and are plausible enablers for the revival of a distressed entity.
21 The IPs shall undertake the debtor’s day-to-day operations during the CIRP to ensure continuity of business operations and minimise value erosion. The IPs adhere entirely to the IBC, the regulations, and the guidelines issued by the regulatory authorities. By doing this, they uphold the integrity of the CIRP process. The IP discharges high standards of ethical and professional conduct towards all dealing with stakeholders in a manner that is fair and transparent to them. The IP manages and preserves the debtor’s assets, thus preventing asset stripping or diversion. 22 The IPs initiate steps for operational efficacies and financial improvements in the CIRP, which enhance the value of the debtor for the prospective resolution applicant.
The IPs’ work is regularly audited and inspected by IBBI and Insolvency Professional Agencies (IPAs) to ensure compliance with regulations and professional standards. 23 IV. Legal Implications of the CIRP A. Legal Procedures and Mechanisms Involved in the CIRP i. Initiation of the CIRP: The CIRP can be initiated through an application by a financial creditor, operational creditor, or corporate debtor itself at the instance of a default. 24 When a corporate debtor fails to pay the due amount, the financial creditors (banks or financial institutions) or operational creditors (suppliers) can 19 Ankit Handa, An Analysis of the Corporate Insolvency Resolution Process as a Route for Acquisitions in India,
29 INT’l INSOLVENCY REV. 234 (2020).
20 Ibid.
21 Ibid.
22 Ibid.
23 Ibid.
24 Insolvency and Bankruptcy Code, 2016, § 6.
apply through an application before the National Company Law Tribunal to initiate the CIRP. The corporate debtors can also trigger the CIRP process by making a plea to the NCLT. The corporate debtor can initiate the CIRP when he doubts financial trouble that might result in the desired insolvency. ii. Role of Resolution Professionals: The NCLT can accept or reject the CIRP application. Once this application is accepted, an Interim Resolution Professional (IRP) is appointed by the NCLT to take control of the debtor’s assets and take over the management of operations. 25 The IRP verifies the creditor’s claims, constitutes the Committee of Creditors (CoC), and manages the debtor’s affairs during the interim resolution process. Further, the CoC appoints the IRP as a Resolution Professional (RP) or may nominate another RP to prepare and implement the resolution plan. 26 iii.
Resolution plan and its approval: The RP invites resolution plans from prospective investors, i. e. , resolution applicants, to revive the business and ensure maximal value for the stakeholders. 27 The RP prepares and submits the resolution plans to the CoC. The CoC evaluates all the resolution plans and approves any of them by at least sixty-six per cent of the CoC members. 28 The approved resolution plan is submitted to the NCLT for further approval. Once the NCLT adopts it, it becomes binding on all stakeholders, and the RP ensures its implementation. B. Rights and Obligations of Different Stakeholders i. Creditors: All creditors have certain rights. They may initiate the CIRP, have representation in the CoC, have voting rights for approving the resolution plans, and are entitled to receive a reasonable share of liquidated assets.
29 Apart from rights, creditors have certain obligations. Creditors must furnish correct details to the IRP/ RP, cooperate with the RP, and abide by the resolution plans. 25 Meenal Garg, The Curious Case of Resolution Professional as an Officer of the Court, 9 RGNUL FIN. & MERCANTILE L. REV. 51 (2022).
26 Ibid.
27 Insolvency and Bankruptcy Code, 2016, § 23.
28 Ibid., § 22.
29 Id. at 27, § 7 & 9.
ii. Debtors: All the debtors involved in the CIRP have certain rights and obligations. 30 They have the right to participate in the resolution process, fair treatment, and appeal against the NCLT orders. They must provide relevant information to the RP or other authorities as requested, extend cooperation to the RP or the CoC, and comply with the provisions of the plan sanctioned. 31 iii. Resolution Professionals: Resolution professionals must have access to the debtor’s record, operate debtor accounts, and make critical decisions in the resolution plans. 32 They must act objectively, respect the law, maximise asset value, and protect the interests of all stakeholders. iv. Personnel: The word “personnel” includes the directors, managers, key managerial personnel, designated partners, and employees, if any, of the corporate debtor.
33 Personnel remain the corporation’s owners, but their control is suspended during the CIRP. Employees have the right not to be terminated from their services, or if terminated, fair compensation must be paid. Both must cooperate with the RP, abide by the resolution plans, and help complete resolution plans. C. Judicial Precedents: Legal Interpretations and Challenges in the CIRP Judicial precedents play an essential role in shaping the legal interpretation and addressing the challenges of the CIRP outlined under the IBC in India. Here are some crucial precedents that have had a significant impact on the legal framework and Regulatory Authorities involved in the CIRP: i. Innoventive Industries Ltd. v. ICICI Bank34: This was one of the earliest judgments interpreting the IBC.
The Supreme Court highlighted the non-obstante clause in the IBC to show its overriding effect over other laws in cases of conflict. The decision reinforced the IBC’s importance in insolvency and bankruptcy 30 Akangsha Dogra, Monopoly Status by Resolution Professionals Is a Mere Facade under CIRP, 1 JUS CORPUS L. J. 171 (2021).
31 Ibid.
32 Insolvency and Bankruptcy Code, 2016, § 5(27).
33 Ibid., § 5(23).
34 (2018) 1 SCC 407.
matters and was firmly anchored by the ruling that provisions under the IBC shall have precedence. ii. Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Gupta35: In this case, the Supreme Court has fixed specific eligibility criteria for resolution applicants under Section 29A of the IBC, laying down that the resolution applicants shall be clean and not connected with the defaulting promoters. This judgment has helped weed out ineligible resolution applicants, ensuring that only credible and capable applicants are considered for the resolution process. iii. Swiss Ribbons Pvt. Ltd. v. Union of India36: In this case, the Supreme Court upheld the constitutional validity of various provisions of the IBC. It emphasised the IBC’s objective of prioritising reviving the company through resolution over liquidation.
This judgment elucidates that the IBC is beneficial legislation aimed at ensuring the timely resolution of insolvency cases and maximising the value of assets. iv. K. Sashidhar v. Indian Overseas Bank37: In this case, the Supreme Court held that the CoC’s commercial wisdom cannot be questionable and that the courts should not interfere with the CoC’s decision if it meets the law’s requirements. That decision reinstated and opened the sanctity of the CoC’s commercial wisdom by limiting the tribunal’s judicial intervention in its decisions concerning the resolution plans. v. Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. 38: In this case, the Supreme Court upheld the supremacy of the CoC in approving the resolution plans. It reinstated the CoC’s decision-making power over the equitable and fair distribution of resolution proceeds among creditors.
The court also clarified the distribution of proceeds among different stakeholders. The court differentiated the role of the CoC and the NCLT during the resolution process. It emphasised that the decision of the CoC about the viability and feasibility of the
35 (2019) 2 SCC 1.
36 (2019) 2 SCC 251.
37 2019 SCC Online SC 257.
38 2019 SCC Online SC 1478.
resolution plan should be respected. The judgment reaffirmed that the NCLT/NCLAT should not interfere with the CoC’s business choices. These judicial precedents on the CIRP under the IBC have clarified various legal interpretations and addressed challenges faced during the resolution process. These judicial preponderances have defined the IBC, but at the same time, it overcomes the significant challenges regarding a balanced approach to the insolvency resolution mechanism in India. V. Comparative Analysis of Insolvency Regimes in Different Countries A. United States: Chapter 11 of the US Bankruptcy Code is related to corporate reorganisation that permits corporations to continue their day-to-day businesses while restructuring their debt obligations.
39 The US has adopted a debtor-in-possession model in which the corporation’s management remains with the debtors during the insolvency proceedings unless a trustee is appointed for cause. It allows the debtor to reorganise the plan and refix its obligations. If the creditors vote on the plan by majority, the court must approve it. The bankruptcy courts oversee the whole proceedings, especially the proper application of law and whether the creditors’ rights are protected. 40 B. United Kingdom: The main aim of a corporation’s insolvency rescue process is to achieve a better recovery for creditors than liquidation. A licensed insolvency practitioner (administrator) is appointed to control the company’s management. 41 The administrator’s primary purpose is to save the company and secure a better recovery for the creditors.
Creditors’ actions against the company are suspended without the court’s permission. 42 A Company Voluntary Arrangement (CVA) is an agreement between the company and its creditors for restructuring debts that involve reduced payments over time. 39 David A. Skeel Jr. , Rediscovering Corporate Governance in Bankruptcy, 87 TEMP. L. REV. 1015 (2015).
40 Ibid.
41 John Armour, Audrey Hsu & Adrian Walters, Corporate Insolvency in the United Kingdom: The Impact of the Enterprise Act 2002, 5 ECFR 148 (2008).
42 Id.at 41.
C. Germany: The German Insolvency Act contains an elaborate environment of insolvency procedures for reorganisation and liquidation. It is like the US Chapter 11 procedure for restructuring and reorganising debts under judicial administration. 43 Debtors can self-administrate during insolvency; however, creditors are restrained from proceeding. Creditors exert much influence through the creditors’ committees and meetings. 44 D. Japan: In Japan, the Civil Rehabilitation Act, the Corporate Reorganization Act, and the Bankruptcy Act govern insolvency and bankruptcy matters. 45 The Civil Rehabilitation Act governs the reorganisation of SMEs, the Corporate Reorganization Act deals with reorganisation issues for large corporations, and the Bankruptcy Act governs the liquidation of individuals and businesses.
46 The court supervises the insolvency and bankruptcy proceedings, emphasising restructuring and rehabilitation with a view to the debtor-in-possession model in some reorganisation cases. 47 E. Australia: The Corporations Act 2001 and the Bankruptcy Act 1966 govern insolvency and bankruptcy in Australia. 48 A company’s destiny is decided via a deed of company arrangement. Insolvency and bankruptcy are followed through three procedures: voluntary administration or liquidation, which can be voluntary or by the court’s order, or personal insolvency, including bankruptcy and personal insolvency agreements. 49 It would fill in the gaps with features such as safe harbour provisions, which emphasise restructuring and the role of administrators and liquidators. 50 F.
India: In India, insolvency matters are governed by the IBC, and corporate insolvency matters are resolved by the CIRP to resolve corporate debtors’ insolvency. 51 It can be initiated by financial creditors, operational creditors, or the corporate debtor by applying the NCLT. After the admission of the application, a moratorium comes into 43 Rene Reich-Graefe, Changing Paradigms: The Liability of Corporate Groups in Germany, 37 CONN. L. REV.
785 (2005).
44 C. W. Hauss, Bankruptcy Law and Practice in Germany, 5 J. NAT’l ASS’n REF. BANKR. 92 (1931).
45 Kent Anderson, Japanese Insolvency Law after a Decade of Reform, 43 CAN. BUS. L.J. 2 (2006).
46 Ibid.
47 Hideo Horikoshi, Japan’s New Corporate Reorganization Law, 38 INT’l LAW. 855 (2004).
48 Lucinda O’Brien, Malcolm Anderson & Ian Ramsay, The Geography of Bankruptcy in Australia, 28 AM.
BANKR. INST. L. REV. 303 (2020).
49 Id. at 48.
50 Ibid.
51 Akshaya Kamalnath, Corporate Insolvency Resolution Law in India - A Proposal to Overcome the ‘Initiation Problem’, 88 UMKC L. REV. 631 (2020). effect, whereunder all legal proceedings against the debtor cease, and an IRP is appointed. It takes control of the corporate debtor’s assets and operations and sets up a CoC comprising financial creditors. By its very nature, the role of the CoC is rather significant in weighing the resolution plans and voting on approval of the same, submitted by the potential bidders within a specified period. Once approved by the CoC, a resolution plan shall be required to be sanctioned by the NCLT to become binding. In cases where the resolution is not viable, assets are liquidated. 52 The code also has provisions for personal insolvency and bankruptcy. Its main feature is timebound resolution, and IBBI is the Regulating Body.
Creditors drive resolution plans. VI.
Future Trends in India’s Corporate Insolvency Laws The future landscape of India’s insolvency laws and regulations anticipates emerging trends and prospective revisions that could influence the effectiveness and equity of insolvency resolution procedures. This can be understood through the following trends: A.
Embracing Technological Advancements in Insolvency Proceedings: The resolution processes can be expedited by integrating technological advancements to streamline. Implementing digital platforms and data analytics offers prospects to improve effectiveness, transparency, and accountability in insolvency processes.53 Using these technologies, the insolvency ecosystem may enhance information sharing, enable efficient stakeholder communication, and encourage a more seamless resolution plan implementation. B.
Strengthening Cross-Border Insolvency Framework: Strengthening the crossborder insolvency framework is another emerging trend. India’s increasing integration into the global economy emphasises the importance of harmonising insolvency laws and fostering cooperation with outside jurisdictions.54 Thus, there is a need to embrace mechanisms that can recognise and enhance foreign
52 Ibid.
53 Catarina Frade, Paula Fernando & Ana Filipa Conceicao, The Performance of the Courts in the Digital Era: The Case of Insolvency and Restructuring Proceedings, 29 INT’l INSOLVENCY REV. 346 (2020). 54 Patrick E. Mears & Edward O. Mears, Legal and Economic Factors Influencing Efforts towards Convergence of National Insolvency Laws and Some Representative Examples, 15 PRATT’s J. BANKR. L. 207 (2019). insolvency judgments. This can lead to greater certainty and effectiveness in handling international insolvency proceedings. C.
Enhancing Stakeholder Participation and Inclusivity: The insolvency laws and regulations in India are expected to prioritise improving stakeholder participation and inclusivity during the resolution process.55 Encouraging creditors, employees, and other stakeholders to participate meaningfully in decision-making fosters transparency and accountability. This inclusive approach aims to establish a more equitable and consensual insolvency resolution framework. D.
Promoting a Culture of Pre-Insolvency Planning and Resolution: Promoting a culture of pre-insolvency planning and resolution has become essential in insolvency laws and regulations.56 Insolvency can be prevented by encouraging businesses to proactively evaluate their financial health, take early action, explore alternate dispute resolution processes, or speed up resolving disputes if it is inevitable.57 Emphasising the importance of preventive measures and outside court settlements is consistent with promoting a proactive and sustainable approach to resolving financial distress. VII.
Conclusion
and Suggestions The CIRP is essential for maintaining India’s corporate sector’s economic stability and integrity. The development of the CIRP through the introduction of IBC in 2016 brought a paradigm shift in India’s approach toward dealing with matters of corporate distress. This paper examines the legal framework underpinning the CIRP, the roles and responsibilities of the different regulatory authorities, and the future trends that shape the process. The legal frame for IBC has given a robust structure to the resolution process for insolvency cases through its balance of power between the interests of creditors and debtors. The time-bound resolution process, the concept of the CoC, and the role of insolvency professionals are some of the critical provisions in the IBC that have contributed substantially towards putting this process on track.
The NCLT and the NCLAT have also played vital roles in adjudicating matters related to insolvencies and setting crucial legal precedence. On the other hand, the working stewardship
55 Ibid.
56 Aurelio Gurrea-Martinez, The Future of Reorganization Procedures in the Era of Pre-Insolvency Law, 21 EUR. BUS. ORG. L. REV. 829 (2020).
57 Ibid.
of the provisions under IBC depends on the regulatory authorities like IBBI. It plays a vital role in developing a transparent and efficient working system for insolvency and the success of the CIRP. These have addressed the emergent challenges and facilitated smoother resolutions through frequent amendments or guidelines of the IBC. India’s CIRP has covered substantial ground toward earning a position with some predictability and effectiveness in the insolvency framework; dynamic changes and system adaptation will be required to keep pace with the changing corporate world. Facilitating this insolvency resolution ecosystem would be resilient and supportive toward economic growth and stability, which could come through effective collaboration by the stakeholders, the lawmakers, regulators, and the participants in the industry.
To enhance the effectiveness of the CIRP, the following steps are being suggested by the researchers: i. The IBC be amended to provide and streamline time limits for each phase of the resolution process to cut short delays and improve efficiency. ii. The UNCITRAL Model Law on Cross-Border Insolvency shall be adopted for crossborder insolvency. iii. Pre-packaged insolvency resolution can be an alternative to traditional CIRP. iv. The operational creditors shall also be given equal rights under the IBC in the resolution process, with a voting share and decision-making at par. v. To ensure transparency and accountability, penalties for non-compliance and incentives for timely disclosures by corporate debtors shall be incorporated. vi.
To efficiently handle increasing caseloads, the number of benches and judicial members in the NCLT and the NCLAT shall be increased, and regular training programs for judges and tribunal members on insolvency laws and procedures could be institutionalised. vii. Technology shall be utilised for real-time tracking and reporting of the insolvency process. viii. Regular training and certification courses shall be imparted for insolvency professionals to equip them better to handle complex matters. ix. Awareness campaigns shall be done amongst all stakeholders, namely corporate debtors, creditors, and the public, on the provisions and benefits under the IBC. x. Regular consultations with industry bodies, legal experts, and academia should be undertaken to obtain feedback and suggestions for the insolvency resolution process.
This will help identify practical challenges and develop solutions regularly. xi. Collaborations with international insolvency bodies and organisations to exchange good practices and expertise and keep pace with evolving international best practices and innovations underpinning insolvency resolution. xii. A formal mechanism shall be developed through which stakeholders may raise their grievances and seek redressal with transparency and accountability in its resolution. These policy recommendations could make India’s corporate insolvency resolution framework more efficient, transparent, and inclusive; they will also contribute significantly to the economy’s stability and growth. Despite various challenges like delays and varying success rates, the CIRP represents a significant step towards a robust insolvency framework in India, promoting financial discipline and economic growth.