Meghna Barik, Pune
Senior officials have indicated that the number of resolutions for stressed assets under the insolvency law is expected to reach 300 in the current financial year. This marks an 80 percent increase from the previous fiscal year, and efforts are underway to expedite the resolution process further. Corporate Affairs Secretary Manoj Govil emphasized the need for the Insolvency and Bankruptcy Code (IBC) ecosystem to be prepared for handling up to 1,000 resolutions.
The IBC, which facilitates a market-linked and time-bound resolution process for stressed assets, has seen creditors recover nearly Rs 3 lakh crore so far, with a recovery amount exceeding Rs 51,000 crore in the 2022-23 fiscal year. Ravi Mital, Chairperson of the Insolvency and Bankruptcy Board of India (IBBI), reported that resolutions increased by 80 percent to 180 in the previous fiscal year and are projected to reach 300 in the current year (2023-24), with approximately 135 resolutions completed by August 2023. Mital urged insolvency resolution professionals to expedite their efforts in resolving cases.
During the 7th annual day event of the IBBI, held in the national capital, Mital emphasized that the IBC has played a pivotal role in reducing non-performing assets and clarified that it functions as a resolution mechanism rather than a recovery mechanism. Govil reiterated the government’s commitment to hastening the resolution process and mentioned the possibility of amending the IBC to achieve faster resolutions.
Govil also pointed out that while 300 resolutions are a positive step, the ecosystem should be prepared to handle 1,000 cases, citing a study that indicates around 5,000 new cases are filed annually under the IBC. He stressed the importance of improving processes, and regulations and filling vacant positions to streamline the resolution process.
NCLT President Chief Justice (Retd) Ramalingam Sudhakar advocated for a pre-packaged insolvency resolution process, particularly for Micro, Small, and Medium Enterprises (MSMEs), given their increased distress post-Covid. He proposed an incremental approach for developing a comprehensive and technologically advanced platform for the insolvency ecosystem, emphasizing the need for AI-enabled decision support systems and integrated case management systems.
Sudhakar also highlighted the necessity of creating an AI-enabled centralized e-platform for case management before the NCLT, with minimal human intervention, and mentioned the potential use of AI in the insolvency ecosystem’s future contours.
Justice Ashok Bhushan, Chairperson of the National Company Law Appellate Tribunal (NCLAT), recognized the transformative role of the judiciary in interpreting the IBC through its judgments. He stressed that technology has greatly facilitated the implementation and evolution of the IBC and emphasized the need for aligning the IBC with international frameworks to handle cross-border insolvency effectively.
In conclusion, these officials underscored the ongoing efforts to enhance the resolution process under the IBC, adapt to changing economic conditions, and leverage technology to ensure timely and effective resolutions.