Govt to set up integrated tech platform to boost insolvency ecosystem, strengthen tribunals: FM
XNirmala Sitharaman presenting the Union Budget
NEW DELHI: To improve the outcomes of the insolvency proceedings, the government will set up an integrated technology platform for the stakeholders as well as increase the number of benches at the National Company Law Tribunal (NCLT).
Presenting the 2024-25 Budget, Finance Minister Nirmala Sitharaman on Tuesday said appropriate changes will be brought in the Insolvency and Bankruptcy Code (IBC).
The Code, which came into force in 2016 and so far has been amended six times, provides for a market-linked and time-bound resolution of stressed assets.
"An Integrated Technology Platform will be set up for improving the outcomes under the Insolvency and Bankruptcy Code (IBC) for achieving consistency, transparency, timely processing and better oversight for all stakeholders," Sitharaman said.
She said IBC has resolved more than 1,000 companies resulting into a direct recovery of Rs 3.3 lakh crore to the creditors.
"In addition, 28,000 cases involving over Rs 10 lakh crore have been disposed of even prior to admission," the minister said.
Besides, efforts are on to boost the tribunals to ensure a speedier resolution process under the insolvency regime.
"Appropriate changes to the IBC, reforms and strengthening of the tribunal and appellate tribunals will be initiated to speed up insolvency resolution. Additional tribunals will be established. Out of those, some will be notified to decide cases exclusively under the Companies Act," Sitharaman said.
At present, NCLT has benches in 15 cities with the principal bench in the national capital. Besides, the National Company Law Appellate Tribunal (NCLAT) has benches in Delhi and Chennai.
Both NCLT and NCLAT are grappling with resource crunch.
In her Budget speech, Sitharaman also said that steps will be taken for strengthening of debt recovery tribunals.
More tribunals would be set up to speed up recovery, she added.
The Economic Survey, tabled in Parliament on Monday, said the loss of control immediately after the beginning of the IBC resolution process has led debtors to settle with creditors as soon as the applications are filed with the NCLT.
"A singularly notable fact is that Rs 10.2 lakh crore of underlying defaults were addressed at the pre-admission stage. This change in debtor behaviour has been a big boon for banks and other lending institutions," it had said, adding the government has "taken several measures to improve the insolvency ecosystem".
IBC has created an "optimal incentive-disincentive mix" to facilitate above board and transparent dealings in creditor-debtor relations, it had said.
Meanwhile, the FY25 budget has also proposed speeding up the voluntary closing of limited liability partnerships (LLPs).
"The services of the centre for processing accelerated corporate exit will see pace. It will be extended for voluntary closure of LLPs to reduce the closure time," the finance minister said in he Budget speech.
Commenting on the measures announced by the finance minister over insolvency, Secretary of NCLT Bar Association Saurabh Kalia said these proposals would surely add value to NCLT and NCLAT and strengthen the entire corporate jurisdiction under IBC and the Companies Act.
"In the budget, a special emphasis has been given to bringing an integrated system for time-bound methodologies and outcomes of the NCLT cases, which is welcoming. This will surely further strengthen insolvency laws," he said.
A special emphasis has also been given to adding more benches by the finance minister, which is the need of the hour as NCLT needs more members and benches.
Jidesh Kumar, Managing Partner, King Stubb & Kasiva, Advocates and Attorneys, said steps will be taken to strengthen tribunals to achieve early and efficient disposal of matters under the IBC.
"An integrated technology platform will be developed to ensure effectiveness, greater consistency, transparency, and oversight for all stakeholders involved in the IBC process," he said.
On the introduction of the technology platform, Shiju PV, Senior Partner, India Law LLP, said: "Efficient and innovative use of technology is critical for a time-bound process like IBC. The introduction of an integrated technological platform is a welcome step to streamline the process and for faster outcomes. We expect the introduction of more NCLT benches also to fasten the process."