Tribunals may see surge in insolvency cases, say experts

India’s company law tribunals are likely to see a surge in insolvency cases with the lifting of the freeze on certain sections of the Insolvency and Bankruptcy Code (IBC), according to experts.

To protect firms from being dragged to insolvency court over defaults on account of the pandemic, the Centre had, in March last year, suspended sections 7, 9 and 10 of the IBC which allow creditors or firms to initiate insolvency proceedings against a corporate debtor. The suspension ended on Thursday.

“As moratorium is lifted on referring a case under the IBC, we may see a flood of applications to NCLTs,” said Rajiv Chandak, partner, Deloitte India.


The suspension was extended twice through a notification. Any extension beyond March 25 would have required an amendment to the IBC, which was not moved by the government in the current session of Parliament that was adjourned sine die on Thursday.

“The burden of cases on NCLTs is now bound to increase so the e-systems and even the physical filing system will have to adjust to the surge,” said Sushmita Gandhi, partner at IndusLaw.

Kumar Saurabh Singh, partner, Khaitan & Co., said, “Along with the RBI (Reserve Bank of India) framework on one-time restructuring, as well as the proposed pre-pack regime for resolution of distress, this will complete the options available with the stakeholders.”

According to Misha, partner at Shardul Amarchand Mangaldas and Co, the increase in cases is unlikely to come from financial creditors as “often financial creditors first look at available alternatives before taking the debtor into NCLT”.