The Insolvency Bankruptcy Board of India (IBBI) marked the year 2023-24 as a milestone despite encountering various obstacles, as the National Company Law Tribunal recorded a notable 43 per cent surge in resolutions. The number of cases resolved escalated from 189 in the previous year to 270 in the current year.
The IBBI is anticipated to present a report to the government within the next 2-3 months, advocating for the incorporation of "mediation" into the Insolvency and Bankruptcy Code (IBC), a matter presently undergoing deliberation and examination.
Additionally, the regulatory body is developing prepackaged insolvency frameworks tailored for significant corporate cases, a provision currently limited to MSME cases. Sudhaker Shukla, a whole-time member of the IBBI, noted during his address at the 7th Insolvency and Bankruptcy Code conclave organised by the CII that for the first time in a year, the number of outputs has exceeded the number of inputs, thereby reducing pendency nationwide.
He highlighted that despite encountering obstacles over the past seven years, the resolution of debts amounting to 3.5 lakh crore was accomplished, with 27,000 applications of Rs 10 lakh crore being withdrawn, underscoring the potency of the Insolvency and Bankruptcy Code (IBC) as a significant debt resolution instrument in the nation.
Shukla emphasised that the law has undergone significant evolution over time, with notable interventions implemented to enhance its efficacy. “In 2023-24, around 12 amendments and 86 interventions have been made in the IBBI within a single year. This portrays that we are responding to market requirements to bridge the gaps,” he added.
Furthermore, he elaborated that a sector-specific strategy has been implemented to tackle distinct challenges, such as those encountered in the real estate sector, aiming for more speedy resolutions.
“We are trying to follow the sandbox approach. The recent amendments were made on real estate where project-wise resolution was made, keeping the allotted houses from liquidation was a big step forward in a sectoral approach,” Shukla said.
Discussing the call for mediation and prepacks for insolvency concerning significant accounts, Shukla noted that it is presently under examination and will likely be presented to the government within the next 2-3 months.
He also mentioned that prepacks for substantial accounts were being deliberated upon due to their focus on expediting resolution processes. Prepackaged insolvency entails negotiating and agreeing upon a resolution plan between the debtor and creditors prior to formal bankruptcy proceedings.
Santhosh, Managing Director of NARCL, the government-supported bad bank, emphasised that a delay in resolution would exacerbate asset quality, rendering revival efforts more challenging.
“There are multiple factors contributing to this delay, and to avoid it, coordination with financial creditors is crucial. The concept of Prepack insolvency is yet to be adopted. However, many practitioners have discussed that this is one of the tools that can be extended to larger corporate disputes. Initially, there could be a promoter-led resolution plan, which can be improved over time,” he said.