Need clear timelines for NCLAT to dispose of appeals: Panel on IBC Bill

A parliamentary select committee has flagged the absence of timelines for the NCLAT in the IBC Amendment Bill, 2025, and proposed a three-month statutory deadline to curb appellate delays

The Insolvency and Bankruptcy Code (IBC) Amendment Bill 2025 has failed to introduce specific timelines for the National Company Law Appellate Tribunal (NCLAT) to dispose of appeals, the select committee on the IBC Bill has said in its report. It suggested the introduction of a clear statutory timeline for the appellate tribunal.

 

The panel has said that the Bill be revised to include a new clause: “The National Company Law Appellate Tribunal shall dispose of an appeal within three months from the date of its receipt.”

 

“Given that the effectiveness of the code rests on a strict time-bound framework… undue appellate delays risk undermining the efficiency and certainty of the insolvency resolution process,” the panel’s report said. 

The select committee — in its report — has asked the government to codify the basic tenets of the cross-border insolvency framework directly within the code itself.

 

This would provide clear legislative guidance and tailor the group insolvency framework to India’s unique institutional environment.

 

The panel has called for decriminalisation of certain IBC provisions. This would ensure effective and accessible creditor-initiated insolvency resolution process (CIIRP) with lower voting thresholds among other recommendations.

 

In the report tabled in Parliament on December 16, BJP MP Baijayant Panda-led committee noted that the amendment Bill had failed to introduce any specific statutory timelines for the NCLAT. And, it sought the introduction of a clear statutory timeline for the appellate tribunal.

 

The parliamentary panel also suggested that the Bill be revised to include a provision that would bar a resolution professional (RP) from becoming the liquidator.

 

The Bill had proposed a change in the process of appointing a liquidator from the existing automatic appointment to one based on the proposal seeking approval of the committee of creditors. This was done to address potential “perverse incentive” for the RP to favour liquidation over resolution to secure additional fees.

 

The liquidator's remuneration is often a percentage of the liquidation estate, unlike the RP's fixed monthly salary.

 

To make sure that the “clean slate” provision of IBC is not misused, the committee has asked the Ministry of Corporate Affairs (MCA) to amply clarify in the Bill that this would not absolve any person, including erstwhile promoters or officers, from criminal liability for offences under Section 69 — punishment for transactions defrauding creditors.

 

For group insolvency, the panel has said that the operational rules, regulations and notifications should take into account domestic factors like promoter-driven litigation, related-party influence, and the inherent complexity of cross-entity claims.

 

The report added, “Committee, therefore, recommends that the rule-making process should ensure that procedural coordination enhances efficiency without inadvertently introducing greater complexity or fostering scope for legal disputes.”

 

The panel has proposed two changes to Section 240 C, which provides the enabling provision to introduce the cross-border insolvency framework. It includes broadening the definition of corporate debtor to include any person incorporated with limited liability outside India.

 

The Bill, it said, should specify that the rules would detail the process for recognising proceedings involving specific foreign countries and judicial cooperation, among others.

 

Regarding the launch of the electronic portal for facilitating the IBC process, the MCA has clarified to the panel that the inserted provision at Section 240B is only an enabling provision, not a mandate for immediate, untested implementation.

 

The ministry has said that the actual operationalisation of this large-scale electronic platform will be subject to a phased approach. This would necessarily include extensive testing, trial runs, and mandatory stakeholder consultation. 

Suggestions of select committee

• Decriminalisation of certain IBC provisions
• Change in the process of appointing a liquidator
• Inclusion of a provision to bar an RP from becoming the liquidator
• Codify tenets of cross-border insolvency framework within the Code itself