Parliamentary panel flags concerns, suggests ways to improve IBC outcomes

'Operational creditors' interests are often overlooked; they should get adequate representation'

Conflicts of interest, lack of transparency and delays in the resolution process continue to undermine the effectiveness of the Insolvency and Bankruptcy Code (IBC), the Parliamentary Panel on Finance said in a report tabled on Wednesday.

 

The panel recommended reviewing the structure of the Committee of Creditors (CoC) to ensure that operational creditors are adequately represented, “as their interests are often overlooked.”

 

The committee said that the absence of a mechanism to ensure that resolution plans are submitted confidentially and fairly, as well as the lack of a robust framework for monitoring and addressing complaints against resolution professionals are some of the key concerns.

 

“The inconsistent interpretation of provisions and excessive delays in case resolution exacerbate inefficiencies,” the parliamentary panel said.

 

It also recommended implementing a direct submission system for resolution plans through a central online portal, bringing rigorous certification standards, specialised training, and independent performance reviews for resolution professionals to improve the efficiency of the Code.

 

Strengthening NFRA

 

To support the National Financial Reporting Authority’s (NFRA’s) expanding role, the committee recommended accelerating the recruitment process and establishing a dedicated, permanent cadre of skilled professionals.

 

“This will be crucial to strengthening its regulatory and oversight functions,” the standing committee’s report said.

 

Only 32 out of 69 sanctioned positions were filled at NFRA as of financial year 2024-25, the committee noted. There was a need for clearer evidence showing how NFRA’s actions including disciplinary orders, inspections, and revisions to auditing standards, have led to tangible improvements in audit practices, the parliamentary panel suggested.

 

The standing committee has also flagged the poor utilisation of budgetary funds by the Ministry of Corporate Affairs and called for corrective measures.

 

In 2024-25, MCA’s allocation as per Budgetary estimates was ~2667.06 crore which was revised to ~1078.43 crore. The ministry, however, has spent ~517 crore so far.

 

“Such reduction of funds at RE stage; under-utilisation and surrender of funds will have an adverse effect on implementation of the schemes and the future budget of the ministry,” the committee said in its report.