Swift resolution required: Capacity gaps threaten insolvency outcomes

The Ministry of Corporate Affairs’ move to seek Cabinet approval for 50 additional National Company Law Tribunal (NCLT) courts and two more National Company Law Appellate Tribunal (NCLAT) Benches once again draws attention to a structural weakness that has long constrained the effective functioning of the Insolvency and Bankruptcy Code (IBC). The problem is not new. The NCLT was originally constituted to administer company law, but it was subsequently entrusted with the responsibility of adjudicating insolvency cases under the IBC without a commensurate expansion in capacity, infrastructure, or support staff. Given this mismatch between mandate and capability, persistent delays in insolvency resolution should not surprise anyone. The data from the Insolvency and Bankruptcy Board of India (IBBI) shows that by September, 8,659 corporate insolvency resolution processes (CIRPs) had been admitted. Of those 1,898 cases were ongoing. More tellingly, about 1,300 CIRPs that resulted in resolution plans took an average of 603 days, while 2,896 cases that ended in liquidation took 518 days, far exceeding the statutory outer limit of 330 days prescribed under the IBC. Such delays erode asset value and undermine the credibility of a framework that was designed to provide a swift and predictable exit for firms. 

In this regard, concerns raised by the select committee on the IBC Amendment Bill, 2025, also deserve close attention. The committee has flagged the absence of statutory timelines for the NCLAT in the proposed amendments and has recommended mandating the disposal of appeals within three months. As the panel has rightly observed, the effectiveness of the IBC rests on a strict time-bound framework, and undue appellate delays risk diluting both efficiency and certainty in the insolvency process. Despite procedural delays, the IBC has had a meaningful impact on India’s banking system and credit culture. Resolved cases have delivered 32.44 per cent recovery of admitted claims, translating into more than 170 per cent of liquidation value, and have helped rescue about 1,300 firms. Equally important, the threat of losing control has altered borrower behaviour, improving repayment discipline and encouraging early settlement. These outcomes underscore that the problem lies not with the design of the IBC but with its institutional execution. 

As the government is doing a number of things to improve the ease of doing business, it must recognise that a smooth and predictable exit mechanism is as critical as facilitating entry. Capacity expansion is, therefore, imperative. However, merely adding Benches will not suffice. Effective insolvency adjudication also requires adequate courtrooms, trained members, supporting staff, and administrative infrastructure, along with technology-enabled case management. Without these, additional Benches may only marginally reduce pendency. Equally important is procedural certainty, particularly regarding the finality of resolution plans. If plans approved by the committee of creditors and upheld by adjudicating authorities can be overturned years later, it erodes confidence in the insolvency process and weakens the foundations of the IBC itself. Unless institutional gaps are addressed in tandem with legislative changes, the IBC risks losing credibility as a swift and reliable mechanism for resolving corporate insolvencies.