(MENAFN- Live Mint) New Delhi: Immediate and targeted steps are needed to boost the efficiency of India's Insolvency and Bankruptcy Code (IBC), as systemic challenges such as delays due to a shortage of judges, uncertainty around finality of resolution plans and lack of accountability among professionals running bankrupt businesses have hampered its potential, the parliamentary standing committee on finance said in a report on Tuesday.

The committee, led by Bharatiya Janata Party (BJP) member of parliament Bhartruhari Mahtab, in its report on the working of IBC tabled in Lok Sabha said that while the code has strengthened creditor confidence and encouraged both domestic and foreign investment, its potential remains hampered by persistent systemic challenges.

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This, the panel said, requires immediate and targeted intervention across all fronts.

Judicial capacity must be scaled up with new benches of the National Company Law Tribunal (NCLT), accountability for resolution professionals must be fixed by empowering the panel of creditors and streamlining disciplinary actions, and finality of approved plans must be guaranteed through express legislative amendment, the parliament committee said.

For removing ambiguity

The panel added that procedural ambiguity must be removed with rules.

“The committee, therefore, urge the ministry of corporate affairs to ensure expeditious implementation of these reforms in a manner that fully realizes their intended impact, leveraging the IBC Amendment Bill, 2025 to realize the full potential of the Code, maximizing enterprise value, safeguarding stakeholder interests, promoting financial stability, and reinforcing India's position as a favourable destination for business,” the report said.

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The committee's recommendation comes at a time the government is working on amendments to the code. A bill to revamp IBC is currently being reviewed by a select committee of Lok Sabha led by BJP MP Baijayant Panda. A revised bill based on the recommendations of this committee is expected to be tabled in parliament either in the ongoing winter session or in the budget session next year, Mint reported on Monday.

“A sustained, integrated, and time-bound approach is essential to ensure that the IBC delivers on its promise of effective, equitable, and efficient insolvency resolution,” said the report tabled by Mahtab's panel.

Practical implementation key

Experts pointed out that the report's findings highlighted the emphasis needed on improving practical implementation of the insolvency law.

“Currently, delays, conflicting regulations, and erratic rulings render the process unpredictable for all parties concerned. The committee advocates for enhanced NCLT capacity, increased responsibility for resolution experts, and legislative clarity to prevent the repeated challenge of authorised plans,” said Shankey Agrawal, partner at law firm BMR Legal.

“These revisions are significant as value diminishes daily when a case remains unresolved in court. Proper implementation will diminish litigation, accelerate business recovery, and enhance the reliability of the insolvency system for lenders, investors, and purchasers. If implemented well, they can shift IBC litigation away from procedural battles and towards substantive commercial resolution,” said Agrawal.

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The overall recovery is only 32.8% of the total admitted claims of creditors, indicating a significant shortfall largely due to firms entering the IBC when assets are already heavily stressed, the report said.

Statutory overlap between IBC and the Prevention of Money Laundering Act (PMLA) is posing a great challenge, the report said.

The simultaneous application of the IBC and the PMLA often creates a conflict, as the attachment of assets by the Enforcement Directorate can undermine the immunity granted to the new management under the IBC, the report said.

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