The Insolvency and Bankruptcy Code (IBC) is getting ready for its biggest overhaul in over nine years of its existence. With the select committee on the IBC (Amendment) Bill, 2025 making 11 observations and suggestions to the IBC recently which is in addition to the 68 amendments proposed by the draft Bill, a major pain point of the Code – time to conclude resolution process – is expected to come down sharply. Baijayant Panda, chairperson of the select committee and member of parliament, spoke to FE’s Manu Kaushik and Prasanta Sahu on the proposed changes, and its impact on the IBC framework. Edited excerpts:
What is the broader theme of the suggestions made by the select committee?
Baijayant Panda: I think it’s important to note that the IBC over the last nine years has been revolutionary. In the last decade, after the implementation in 2016, the bank situation has turned around dramatically. We had high NPAs and IBC has led to dramatic improvement in recoveries, rehabilitation and liquidations. The statistic that really caught our attention was that in the last 2-3 years, recoveries of Rs 50,000-60,000 crore is happening every year. This is a big amount of money that is coming back into the economy which was stuck earlier because of the lack of a bankruptcy formula.
The timelines are a major issue under the IBC. That has been the major focus of the Bill. The timelines are strictly defined now. Earlier, they had been left open and suggestive. Now, they have gone from “may” to “shall”. Situations which were taking 3-4 years will happen within one year now. This was the single biggest demand of every stakeholder.
The other crucial aspect was the “Clean Slate” principle. It was clear in IBC that when a company goes into IBC, and a resolution plan is finalised based on the bid of the new promoter, the accepted bid amount was the final amount. All other claims get eliminated. Although it was in the Act, still claims were being made by state and central government entities, and other claimants. There have been court judgments that made it clear that the original act itself is clear that there is a “Clean Slate” principle. But still because of the confusion, those court judgments needed to be translated into the act. The committee has further clarified that this principle applies from the original date.
Another big aspect that we have suggested that the resolution professional (RP) had a conflicted incentive system because they were both involved in resolution as well as liquidation. We have made it clear that the RP has to focus on resolution. If he cannot achieve resolution, then mandatorily he will be changed. A new professional will be appointed whose job is only liquidation.
Then, we have added some strict timelines for NCLAT. Cross border and group insolvency were not there in the original Act but a lot of stakeholders were asking for it. The group insolvency is a little simpler because it is all within India, but the cross-border is more complex. This is an evolving area even for other countries. In the Act itself, it was mentioned that this issue will be dealt by the rules. But some stakeholders suggested that we must give some overall guidelines about what should the rules cover. We have given a guiding paragraph that these aspects should be covered in the rules.
The committee has suggested 3-month timeline for NCLAT to pass orders but there are no timelines as such for NCLT to approve or reject resolution plans.
Panda: Basically, the whole effort has been to remove subjectiveness and make it objective. In India, not just in IBC but in many other courts, timelines are not adhered to strictly. But that has to change. We have to improve the speediness of resolutions. After filing was made, when it should be listed was subjective. It is not a good thing to leave it to subjective decisions of individual people. It should be clearly defined. There were some genuine reasons for delays. For example, if some paperwork was incomplete, the NCLT would send it back. The ministry has come up with a portal and it has to be uploaded on the portal and there is a checklist of items which has to be there. If those items are not complete, the application cannot be filed. At the filing stage itself, that problem is sorted out.
After it is filed, there should be no subjectivity left as to how listing should be done. So there’s a 14-day timeline (given in the Bill). At every stage in NCLT, the timelines have been provided.
What kind of impact IBC has on the behaviour of the borrowers?
Panda: We had developed a bad culture in India that defaults became common and many bad actors thought that once they took a loan, they never had any obligation to repay it. IBC has put the fear into such people if they don’t play fair, then they could lose their company. People have become much more compliant.
Also, this bill has proposed major overhaul because there are 68 amendments. In this bill, some further steps have been taken to crack down on frivolous claims. People were using IBC as a means of pressurising a company. IBC is for actually pushing the company into rehabilitation and resolution plan where it goes into insolvency and out of the promoter’s hands.
When the revised bill is likely to be taken up in the parliament?
Panda: In this session, there is not enough time for the ministry to take cabinet approval. So it will happen in the budget session.
The average time to conclude a resolution process has been rising, and way above the 330-day limit set to conclude the process. How does the bill tackle this issue?
Panda: The 330 days will be strictly applied. In some cases, there may be slight delays for which the bench has to give the explanation in writing for the delay. I expect that the resolution time will drastically come down by at least 50%.
The committee has give some suggestions on the waterfall mechanism pertaining to the government dues…
Panda: The waterfall mechanism has evolved over the last nine years. Everywhere in the world, bankruptcy process involves the financial secured creditors getting most of their money back. They may have to take some haircut. The promoters also lose the company and it goes into rehabilitation. The reality is short-term unsecured operational creditors, which is normally for 30-90 days, cannot be equated with long-term secured financial creditors. The courts have given decisions over the years, including Supreme Court, and that has got codified into the waterfall mechanism. We have not tampered with it. Whatever waterfall mechanism has evolved by the original Act as well as by Supreme Court decisions, that has remained codified. The Supreme Court had already ruled that the intent of the original Act was that government dues cannot supersede the financial creditors. It is just getting codified in the Act.
The select committee has also extended the definition of resolution plan to to allow for one or more resolution plans for a corporate debtor undergoing CIRP. What was the purpose?
Panda: It was always the case. We have just clarified the language because some stakeholders suggested it.
Some stakeholders argue that the amendment bill has failed to repeal the provisions enabling disciplinary proceedings against an insolvency professional for not reporting a PUFE transaction. What’s your take on it?
Panda: Nothing has been missed. There was a demand that RPs should be classified as public servants so that they can come under the Prevention of Corruption Act. It was discussed by us. Right. There are three high court judgments which have taken different positions on whether RP should be (considered) public servant or not. Supreme Court is currently hearing and they will take a final decision. We took a decision that if Supreme Court is going to take a decision shortly, then if we take one stand and it gets reversed, there is no point. So, we deliberately decided not to do it.