Justice Venkatesh of the Madras HC highlights the systemic failures plaguing India’s insolvency law under the IBC. His powerful critique stresses the urgent need to fix the institutional framework rather than just revisiting the legislation.
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CHENNAI: Since the Insolvency and Bankruptcy Code (IBC) came into force in 2016, it has been celebrated as a transformative step in India’s legal and financial reforms. Designed to expedite insolvency proceedings and facilitate the revival of distressed businesses, the Code marked an important departure from the slow mechanisms of the past.
Yet, as it approaches a decade of implementation, it is not the law itself but the system responsible for enforcing it that appears to be faltering.
In a recent keynote address titled “The Working of the IBC, Some Thoughts and Reflections”, Justice N. Anand Venkatesh of the Madras High Court offered a candid and incisive critique of the IBC’s practical shortcomings.
Departing from conventional praise, his remarks provided a sharp analysis of the systemic and institutional challenges that continue to hamper the Code’s effectiveness. His observations, drawn directly from judicial experience, highlight the structural inefficiencies that hinder the IBC’s promise.
Insolvency and Bankruptcy Code (IBC)
When the IBC was enacted, it promised time-bound resolution of insolvency cases, revival of sick companies, and maximization of asset value.
It sought to replace a fragmented and inefficient legal framework and instill creditor confidence. The initial results were promising; many big-ticket cases saw resolution and recoveries, and the Code was even hailed globally for its innovation and ambition.
However, Justice Venkatesh points out that the problem does not lie with the law itself, but with its implementation. He stated,
““There is no crisis in the Code. The crisis lies in the system tasked with applying it.”
Justice Venkatesh Observations
- Underperforming Tribunals (NCLT & NCLAT):
The National Company Law Tribunals (NCLTs) and their appellate counterpart, NCLAT, are the bedrock of the IBC framework. However, according to Justice Venkatesh, these institutions are suffering from serious structural deficiencies.
Tribunal benches often lack judges with core expertise in corporate law or finance, leading to delays and inconsistent verdicts. This talent mismatch weakens the tribunal’s ability to handle complex insolvency issues, undermining the Code’s intent.
- Registry Disfunction and Arbitrary Listings:
Justice Venkatesh highlighted the randomness in how cases are listed. “Urgency is not decided by urgency. It’s decided by access”, he remarked, pointing to opaque registry practices. This results in critical matters being pushed down the priority ladder, eroding stakeholder trust, and delaying justice.
- Institutional Fragility:
From infrastructural deficits to prolonged vacancies and mounting caseloads, the IBC ecosystem is being pushed to its breaking point. “We are running a marathon with a limp”, he remarked, underscoring how the lack of systemic preparedness is jeopardizing the Code’s success.
- Bureaucratic Red Tape:
Ironically, the very Code that was meant to break through bureaucratic red tape is now getting tangled in it. Excessive regulation and overly rigid procedures are reviving the same delays and inefficiencies the IBC set out to eliminate in the first place.
In his speech, Justice Venkatesh didn’t just point out the flaws; he laid down a roadmap for meaningful reform:
- Tribunal members should possess substantive experience in insolvency law or finance. Filling benches with generalist bureaucrats or underqualified individuals weakens adjudicative quality.
- Case listings should be automated and rule-based, reducing human discretion and arbitrariness. This can restore faith in the procedural integrity of the tribunal system.
- Just as private enterprises are measured against targets, tribunals too must be monitored through performance metrics, caseload clearance rates, and quality of judgments.
- Legal professionals, financial experts, and civil society should remain actively engaged in IBC reforms. Justice Venkatesh emphasized that the law is a living instrument, its success lies in ongoing vigilance and participation.
Justice Venkatesh’s remarks were made in context with the Supreme Court’s observations in State Bank of India v. Consortium of Murari Lal, where it remarked:
“We are building skyscrapers on foundations that are not even solidified yet.”
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