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A has reviewed the (IBC) and recommended sweeping reforms to address massive fund diversion and procedural delays. The committee highlighted a severe gap in recovery—out of Rs 3.76 lakh crore stuck in avoidance transactions, only Rs 7,500 crore was recovered. To combat this, the government is enhancing coordination between the (IBBI), (RBI), and (ED), while empowering Resolution Professionals and expanding the (NCLT) infrastructure.
The Insolvency and Bankruptcy Code (IBC) was enacted in 2016 to consolidate laws relating to reorganization and insolvency resolution in a time-bound manner, aiming to maximize the value of assets, promote entrepreneurship, and balance the interests of all stakeholders. A critical aspect of the Corporate Insolvency Resolution Process (CIRP) is identifying and recovering assets lost through avoidance transactions (preferential, undervalued, defrauding, or extortionate transactions made before insolvency). The Parliamentary panel's revelation that only a fraction of the Rs 3.76 lakh crore involved in such transactions has been recovered exposes a significant vulnerability in the twin balance sheet problem resolution mechanism. When promoters siphon off funds, it directly erodes the asset quality of lending banks, exacerbating Non-Performing Assets (NPAs). The proposed reforms, including explicit powers for Resolution Professionals to conduct deeper forensic audits and mandatory upfront deposits for unsuccessful resolution applicants filing appeals to deter vexatious litigation, are crucial to ensure the claw-back process is effective and the IBC remains a credible deterrent against financial indiscipline.
The effectiveness of the IBC is heavily dependent on inter-agency coordination and institutional capacity. The intersection of insolvency proceedings under the IBC and criminal proceedings under the Prevention of Money Laundering Act (PMLA) often creates jurisdictional conflicts and delays, as both the Enforcement Directorate (ED) and the Insolvency and Bankruptcy Board of India (IBBI) pursue the same assets. The government's recent initiative to establish a standardized mechanism for the restitution of attached assets through the Special Court under the PMLA marks a significant step towards harmonious construction of overlapping statutes. Furthermore, the persistent delays in the National Company Law Tribunal (NCLT) system—with the average resolution time ballooning to 853 days against the mandated 330-day timeline—highlight the need for urgent institutional capacity building. Increasing the number of NCLT and National Company Law Appellate Tribunal (NCLAT) benches is essential to clear the backlog of over 30,000 pending cases, ensuring the IBC fulfills its promise of swift resolution.
The role of Parliamentary Standing Committees is pivotal in ensuring executive accountability and driving legislative reform. By continuously monitoring the implementation of the IBC and scrutinizing the government's 'Action Taken Reports', the Committee acts as a vital oversight mechanism. Its recommendations compel the executive, specifically the Ministry of Corporate Affairs, to course-correct and address systemic flaws, such as the need for improved forensic audit capabilities and the empowerment of Resolution Professionals. This dynamic illustrates the separation of powers and the continuous evolution of economic legislation in response to implementation challenges. For UPSC, understanding how these committees evaluate the efficacy of complex laws like the IBC provides insight into the practical workings of India's parliamentary democracy and its impact on the economic landscape.