Parliament panel wants NCLAT appeals decided in 3 months, curbs liquidation bias

New Delhi: National Company Law Appellate Tribunal (NCLAT) should decide appeals filed before it in bankruptcy cases within three months, as timely decision-making at the appellate level is crucial for rapid resolution of distressed companies, the Lok Sabha select committee that reviewed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 has said.

The original bill had proposed a 14-day window for admission of bankruptcy proceedings in National Company Law Tribunal (NCLT), the first judicial platform where a bankruptcy case is heard, but had not proposed any timeline for cases to be decided at the appellate level.

The committee, led by Bharatiya Janata Party (BJP) member of parliament (MP) Baijayant Panda, said in its report tabled in Lok Sabha on Wednesday that the absence of prescribed statutory timelines in IBC for disposal of appeals by the appellate tribunal has resulted in delays, particularly in appeals challenging rejection of claims during the debt resolution or liquidation processes, as well as appeals against approval or rejection of resolution plans.

The report is uploaded on the Lok Sabha's website.

Noting that undue appellate delays risk undermining the efficiency and certainty of the insolvency resolution process, the committee recommended that NCLAT “shall dispose of an appeal within three months from the date of its receipt.”

The select committee also recommended that resolution professionals who administer distressed companies on behalf of creditors should not be allowed to become official liquidators of the entity if turnaround efforts fail.

The committee felt that since compensation for liquidators is a share of the sale proceeds, as against that of the resolution professional who only draws a salary, there is a perverse incentive to send companies into liquidation.

The original bill had proposed that two-thirds of the creditors could by a vote decide to appoint the same resolution professional as the liquidator, in place of the existing system of automatic appointment.

However, that proposal has not been accepted by the select committee, which instead, recommended that tribunals should ask the regulator—Insolvency and Bankruptcy Board of India (IBBI)—to recommend a liquidator, who has not been the resolution professional for that company.

The committee strongly endorsed the futuristic reforms in the bill, especially in providing a framework for handling the insolvency of multiple entities within a business group and cross-border insolvency where entities and creditors could be in multiple jurisdictions.

The bill seeks to introduce new provisions based on global best practices such as introduction of a Creditor-Initiated Insolvency Resolution Process (‘CIIRP’) featuring an out-of-court mechanism for resolving cases of genuine business failures with cost-effective resolution, minimal business disruption and reduced reliance on formal judicial proceedings, said Manmeet Kaur, partner at law firm Karanjawala & Co.

The proposed ‘group insolvency’ framework aims to resolve industrial sickness involving complex corporate group structures and encourages coordinated decision-making, said Kaur.

The select committee examined 68 amendments to the bill, which aim to strengthen the insolvency framework by reducing delays, maximising value for stakeholders, and improving governance and transparency in insolvency and liquidation processes.

The committee’s report adopts a balanced and pragmatic approach, reinforcing IBC’s role in improving ease of doing business, protecting stakeholder interests, and ensuring a robust, time-bound resolution regime that supports economic stability and growth, a person informed about the committee’s deliberations said on condition of anonymity.

The select committee endorsed the provision in the bill enabling the administrators of sick companies to review dubious transactions by the defaulting management in the two years preceding the date of filing the first insolvency application against the company. The existing law enables a review of transactions for two years from the date of admission in a tribunal. Given the delays in admission, often administrators find it challenging to make meaningful recoveries from such questionable deals done by the sick company, in the current regime.

The select committee also endorsed the proposal in the bill to let creditors to initiate recovery from dubious pre-bankruptcy (avoidance) transactions, in cases where the resolution professional has not taken that step.

The government has listed the amendment bill to be taken up for passage in Lok Sabha in the winter session, but it remains to be seen how quickly it moves given the shortage of time in the current session which ends on Friday.