(MENAFN- KNN India) New Delhi Dec 4 (KNN) The Parliamentary Standing Committee on Finance has noted that the Insolvency and Bankruptcy Code (IBC) has played a significant role in strengthening India's business environment.

However, it also warned that persistent systemic challenges continue to hinder the Code's overall effectiveness.

In its report titled 'Review of Working of IBC and Emerging Issues,' the Committee noted that 1,194 companies have been resolved under the IBC framework, with creditors recovering 170 percent of liquidation value and over 93 percent of fair value.

However, it expressed 'profound concern' over persistent bottlenecks, including slow admission of insolvency cases, excessive delays, mounting litigation, and incomplete implementation of key frameworks such as individual insolvency and the pre-packaged insolvency mechanism for MSMEs.

The Committee said the average time for completing the Corporate Insolvency Resolution Process (CIRP) has risen to 713 days, more than double the mandated 330 day limit.

It attributed this to a shortage of National Company Law Tribunal (NCLT) benches, vacancies among judicial and administrative staff, as well as frequent frivolous appeals by promoters and unsuccessful bidders, which erode asset value.

To address these concerns, the panel urged the government to expedite the creation of additional NCLT benches and fast-track the rollout of the Ministry of Corporate Affairs' Integrated Technology Platform (iPIE) for centralised case management.

It also recommended that the Insolvency and Bankruptcy Board of India (IBBI) mandate an upfront deposit for unsuccessful resolution applicants filing appeals and increase penalties for frivolous challenges.

The report observed that despite strong recovery relative to liquidation value, the overall recovery rate remains low at 32.8 percent of total admitted claims, mainly because companies often enter IBC proceedings at an advanced stage of financial distress.

It also flagged concerns over valuation practices, highlighting limited transparency and accountability and a restricted pool of quality resolution applicants.

The Federation of Indian MSMEs (FISME) has been consistently voicing concerns related to insolvency of individuals and proprietorship firms and MSME dues under the waterfall mechanism in Section 53 of Insolvency and Bankruptcy Code, 2016.

(KNN Bureau)

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