Strengthening India's Insolvency and Bankruptcy Code: Key Challenges and Proposed Reforms

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The Insolvency and Bankruptcy Code (IBC) in India has come under review, with a Parliamentary Standing Committee on Finance highlighting key challenges and proposing reforms. The report underscores the need for a more structured and efficient approach to handling distressed corporate assets.

Challenges In Current IBC Framework

While the IBC has contributed to streamlining corporate resolutions, several issues persist. These include conflicts of interest, lack of transparency, and prolonged delays in insolvency proceedings. The existing oversight mechanisms for resolution professionals remain weak, and operational creditors have minimal representation in the Committee of Creditors (CoC). These factors hinder the IBC’s ability to resolve cases effectively.

Proposed Four-Point Action Plan

To improve the IBC’s efficiency, the Committee has put forward a four-point reform strategy:

• Centralised Submission System - Establishing a dedicated online portal for submitting resolution plans would enhance confidentiality and fairness. This would help prevent undue advantages and maintain transparency.

• Strengthening Resolution Professionals (RPs) - The role of RPs needs enhancement through stricter certification processes, specialised training, and independent performance evaluations. These measures would ensure greater accountability and efficiency.

• Monitoring Resolution Timelines - Implementing a structured tracking mechanism for insolvency cases can help identify delays and inefficiencies. A tabular system would allow policymakers to monitor case progress and address bottlenecks in the resolution process.

• Reforming the Committee of Creditors (CoC) - A review of the CoC structure is necessary to improve the representation of operational creditors. This would ensure a more balanced resolution process by recognising their significant role in insolvency proceedings.

Impact Of Recommendations

The suggested reforms aim to enhance the IBC’s effectiveness by improving transparency, accountability, and fairness. Ensuring confidentiality in submissions, strengthening the role of resolution professionals, and streamlining monitoring mechanisms would lead to a more efficient insolvency framework. Revisiting the CoC structure would empower operational creditors and contribute to better resolution outcomes.

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