Speaking on June 11 on the Insolvency and Bankruptcy Code (IBC) completing 10 years and AI’s impact on its future, the former IBBI chief said, “This (AI) will actually increase the load on the ecosystem.”
Sahoo also flagged the poor treatment of micro, small and medium enterprises (MSMEs), which are operational creditors under the IBC. “MSMEs are practically getting zero amount as of today… That is a big concern, and there is a fundamental mistake in the law and its understanding,” he said.
Unlike financial creditors (FCs), operational creditors (OCs) are classified into four categories, each occupying a different level in the waterfall mechanism that determines the order in which recovered amounts are distributed. Workmen rank first, followed by employees, government dues, and finally supply vendors, including MSMEs.
Sahoo also criticised the concentration of powers with financial creditors, and said they lack business acumen. “Ninety-five per cent of OCs have business wisdom but 95 per cent of financial creditors do not have business wisdom. Their (FCs) job is to increase the size of the pie, not to divide it,” he said.
He said resolution plans and liquidation are equally efficacious ways of resolving stress, but delays in case resolution remain the biggest weakness of the system currently.
Realisations under the IBC as a percentage of admitted claims fell to 30.56 per cent as of March 2026 from 32.8 per cent a year earlier. As a percentage of liquidation value, recoveries declined to 167 per cent in March 2026 from 170 per cent in March 2025, according to IBBI data.
Sahoo also stressed the need to expand the capacity of the National Company Law Tribunal (NCLT) benches through a systematic assessment of workload. The current sanctioned strength of 63 members, he said, was decided on an ad hoc basis.
Originally set up to deal only with Companies Act matters, the NCLT has taken on the additional workload under the IBC without a corresponding increase in capacity.
“We always come up with an ad hoc number, and we don’t even fill up that number. The process of our selection and eligibility is such that we want only retired people to come for three years, unlike in the US where it is 14 years… NCLT has all the handicaps they have, but still we want them to deliver,” Sahoo said.
He also called for changes to the NCLT recruitment system to attract better talent. “If you are given a job for three years and we know how much money you are paying, no one, even a small advocate, has any incentive to come here,” he added.
Against a sanctioned strength of one President and 62 members, the ‘in position’ strength of NCLT was 53 as on February 14, according to a standing committee report.
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