IBC overhaul: Parliament panel seeks advance ruling system; can these fixes speed up resolutions?

A Parliamentary panel has called for sweeping improvements to India’s insolvency framework, including a new advance ruling mechanism that would give stakeholders clarity even before a case is admitted under the Insolvency and Bankruptcy Code (IBC). The proposal is aimed at reducing avoidable litigation and safeguarding the time-bound nature of the resolution process, according to PTI.The recommendations were made by the Parliamentary Standing Committee on Finance, which tabled its report in the Lok Sabha on Tuesday. The panel also backed integrating mediation as an alternative dispute resolution tool to ease the pressure on adjudicating authorities handling stressed assets under the IBC.Panel backs advance ruling, mediation and clean-slate clearancesThe committee said the advance ruling mechanism should address key legal or factual issues at the pre-admission stage, enabling faster movement of cases. It also proposed the integration of mediation to help cut the volume of disputes reaching the National Company Law Tribunal (NCLT).In addition, the panel urged the creation of a transparent online system for issuing ‘no dues’ certificates and statutory clearances immediately after a resolution plan is completed. Such a mechanism, it said, would ensure that revitalised companies genuinely begin operations with a clean slate.Since the IBC came into force in 2016, a total of 1,194 companies have been resolved, with creditors realising Rs 3.89 lakh crore — more than 170% of liquidation value and over 93% of fair value assessed at the time of admission. These figures are as of March 31 this year.Stronger NCLT capacity, stricter deterrents for frivolous appealsThe panel said the government should expedite the rollout of additional NCLT benches and fast-track the operationalisation of the proposed Integrated Technology Platform (iPIE) to improve centralised case management at both the NCLT and the National Company Law Appellate Tribunal (NCLAT).To curb vexatious litigation, the committee recommended that the Insolvency and Bankruptcy Board of India (IBBI) mandate an upfront threshold deposit for unsuccessful resolution applicants filing appeals. It also called for substantially higher penalties for frivolous applications.Other suggestions included revisiting homebuyer eligibility criteria, revising the waterfall mechanism governing priority of claims during liquidation, and simplifying procedures for distressed MSMEs. The panel said early intervention must continue to be prioritised to preserve enterprise value and stressed that once the NCLT approves a resolution plan, implementation should be prompt and monitored, with provisions to penalise non-compliance to maximise stakeholder recovery.