IBC: 6 years of happiness?

Effective implementation of the IBC started in December 2016 - so, it has completed 6 years of life. Do we have reasons to feel happy about what it has achieved? It has been a great, long-needed cultural shock to the country’s perennial defaulters, in giving them a clear unmistakable message that if have lost the lenders’ trust, you also lost your? business, and for good. However, when it comes to unlocking of values, with the timeliness which was the big slogan of the Code, do we have the same sense contentment? The RBI’s report of Trends and Progress in Banking may give brownie points to IBC for highest recoveries among the other options, but examining the data of pending corporate insolvency resolution processes (CIRP), in yet another RBI publication, Financial Stability Report, one gets a different picture altogether.??

The pending number of CIRPs as of 30th September, 2022 was 1947, which has continued to go up, even though fresh admissions of CIRPs have continued to come down. Since its start, only 553 resolution plans were approved, while 1807 CIRPs ended in liquidation. How many cases of liquidation are currently pending -the data is not there in this report, but anyone who is familiar with the process will affirm that the coveted timelines of one year or 9 months are rarely adhered to in practice.

There are two huge problems - one is the indecisive body of creditors sitting the CoCs. Bankers -for reasons which are quite well known, refuse to decide. Indecision leads to liquidation. Unfortunately, the collective forum of the so-called stakeholders consultation committee now extends to liquidations as well - hence, indecision stalls action there too.

The second huge problem is the missing appointments to NCLT benches. Of the 56 member strength, almost half are vacant. Bench members have to do triple shifts at time. There may be 60 matters listed in the day's cause list - the Bench hardly reaches a dozen when it rises for the day. In some cases, matters have adjourned for over 20 times for paucity of time, while there are no objections or interim applications.

An important piece of law that so importantly affects our national economic performance, has been hamstrung with infrastructural problems.

Some real reforms, and some real strong will, are both needed. Reforms are needed to declog the NCLTs so that matters which are non-adjudicative in nature do not need to go before the Benches. However, even more importantly, Benches have to limit the time taken by arguing counsels, without regard to the seniority of the counsel. Even the Supreme Court does that. Peripheral matters need to be settled soon, so that the core matter can be heard.