House panel calls for strict case disposal timeline by NCLAT

New Delhi: A Parliamentary select committee has called on the government to stipulate a strict timeline for bankruptcy case disposal by the appellate authority, design cross-border and group insolvency frameworks factoring in the domestic environment and decriminalise certain offences to further expedite the rescue of stressed firms.

The committee headed by senior BJP leader Baijayant Panda, which was tasked with vetting the Insolvency and Bankruptcy Code (IBC) Amendment Bill, 2025, submitted its report in Parliament on Wednesday.

The corporate affairs ministry, which had introduced the bill in August, is expected to revise it based on the panel’s suggestions that it deems fit, and seek Parliamentary clearance.


Key suggestions

The panel has recommended that the bill be tweaked to incorporate a “clear statutory timeline” of three months for the National Company Law Appellate Tribunal (NCLAT) to dispose of an appeal.

“Given that the effectiveness of the code rests on a strict time-bound framework, the committee therefore emphasises that undue appellate delays risk undermining the efficiency and certainty of the insolvency resolution process,” it said.

The committee has called on the government to incorporate basic principles of the cross-border insolvency framework within the current law itself to provide clear legislative guidance.

The government should consider the unique socio-economic, judicial, and institutional realities of India while designing the cross-border framework around a model UN law. The new framework is required to ensure easier access for Indian creditors to overseas assets of stressed companies.

It also suggested that the government firm up the group insolvency framework, keeping in mind factors, such as promoter-driven litigation, related-party influence, and the inherent complexity of cross-entity claims.

"The committee's report has focused on repairing stress points exposed by practice and jurisprudence. It signals a return to first principles—insolvency as a collective, time-bound resolution mechanism—not a debt recovery tool or an endless litigation forum," said Yogendra Aldak, executive partner at Lakshmikumaran & Sridharan attorneys.

Shankey Agrawal, partner at BMR Legal, said, "The recommendations seek to restore the system to early intervention, established priorities, and creditor-driven results, while deliberately avoiding the inclination to over-engineer group and cross-border insolvency situations".

The panel has also recommended that certain sections of the extant law dealing with the contravention of moratorium and resolution plans and non-disclosure of dispute or debt payment by operational creditors be decriminalised and substituted with penalty provisions.

It has asked the government to clearly state that the proposed “clean slate” principle for corporate debtors after resolution would not absolve any person, including erstwhile promoters or officers, from criminal liability for defrauding creditors.