Today(on 23rd July), Finance Minister Nirmala Sitharaman announced plans to revise the Insolvency and Bankruptcy Code (IBC) to strengthen NCLT tribunals and improve asset recovery. The changes aim to enhance the efficiency of handling stressed assets.
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NEW DELHI: Indian government has announced the establishment of additional tribunals for the National Company Law Tribunal (NCLT). This announcement was made by Finance Minister Nirmala Sitharaman during the presentation of the Union Budget for the FY 2024-25 on Today( 23rd July).
Integrated Platform for IBC
The government is set to introduce an integrated platform aimed at enhancing the outcomes of the Insolvency and Bankruptcy Code (IBC).
According to Sitharaman-
“Necessary changes to the IBC, along with reforms and strengthening of tribunals and appellate tribunals, will be implemented to expedite insolvency resolution.”
This move includes the establishment of additional tribunals, with some being specifically notified to handle cases exclusively under the Companies Act.
Resolution Achievements under IBC
Highlighting the success of the IBC, Sitharaman stated that the code has resolved more than 1,000 companies, leading to a direct recovery of Rs.3.3 lakh crore for creditors. Furthermore,
“Additionally, 28,000 cases involving over Rs. 10 lakh crore have been resolved even before admission.”
-said Sitharaman.
Technology Integration for Improved Outcomes
An integral part of the proposed reforms is the development of an integrated technology platform for the IBC ecosystem.
Sitharaman elaborated-
“An integrated technology platform will be established to enhance the IBC process, ensuring consistency, transparency, timely processing, and improved oversight for all stakeholders.”
This platform is expected to bring significant improvements in the efficiency and transparency of the insolvency resolution process.
Voluntary Closure of LLPs
The Union Budget also addresses the need for expediting the voluntary closure of Limited Liability Partnerships (LLPs).
Sitharaman announced-
“The Centre for Processing Accelerated Corporate Exit will accelerate its services and extend them to include the voluntary closure of LLPs, aiming to reduce closure time.”
This measure aims to streamline the process for businesses seeking to close operations voluntarily, thereby reducing the administrative burden and time involved.
Expansion of NCLT and NCLAT
Currently, the NCLT has benches in 15 cities, with its principal bench located in Delhi. It also has an appellate tribunal, the National Company Law Appellate Tribunal (NCLAT), with benches in Delhi and Chennai. Both NCLT and NCLAT have been grappling with a resource crunch, a challenge that the government aims to address through these reforms.
Strengthening Debt Recovery Tribunals
The Finance Minister also announced measures to strengthen debt recovery tribunals. Sitharaman emphasized-
“Additionally, steps will be taken to strengthen debt recovery tribunals.”
This initiative is aimed at accelerating the debt recovery process and ensuring that creditors can recover dues more efficiently.
Comprehensive Reforms for Better Efficiency
The Union Budget 2024-25 proposes a series of comprehensive changes aimed at improving the efficiency and transparency of insolvency and bankruptcy proceedings.
Key proposals include:
- Establishing an integrated technology platform to enhance outcomes under the IBC.
- Extending services for the voluntary closure of LLPs.
- Strengthening and expanding the number of debt recovery tribunals to expedite recovery processes.
These measures are designed to resolve more cases and recover substantial amounts owed to creditors, thereby contributing to a healthier financial ecosystem. The Finance Minister reiterated the importance of these reforms in streamlining processes and improving outcomes for all stakeholders involved in insolvency and bankruptcy cases.