After a case is admitted to the NCLT, it has to be solved within 180 days. But, these timelines are not followed strictly.
The Centre is planning to amend the Insolvency and Bankruptcy Code (IBC) to add a provision for mediation to slash the cost and time taken for the resolution of cases, Business Standard reported. This will allow the government to work out the pre-packaged resolution scheme, the individual bankruptcy scheme and the use of artificial intelligence.
After a case is admitted to the National Company Law Tribunal (NCLT), it has to be solved within 180 days, which can be extended by another 90 days. These timelines are not followed strictly. For example, the Essar Steel resolution is still unfinished even though it has been nearly 600 days since the case's admission.
To cut this time lag, the government wants to provide a mediation mechanism, used by foreign institutions especially in the US. A senior government official has told the paper that the Insolvency and Bankruptcy Board of India (IBBI) is trying some things to "remodel the code".
Moneycontrol could not independently verify the story.
The process of mediation means solving the disputes through discussions and analysing where the interests of the parties lie. The involved parties try to come to a settlement through a joint evaluation. It is overseen by a neutral person called the mediator. This person has no authority to impose any settlement. S/he can only weigh possible options.
This alternative to the conventional dispute resolution process is popular for settling cases in the US. It is becoming a preferable option worldwide as mediation gives the failing business the possibility of an overhaul instead of insolvency.
The discussion about adopting this method was initiated by the Supreme Court in 2018. A bench of Justice RF Nariman and Justice Indu Malhotra acknowledged the fact that delays in cases by NCLT and the National Company Law Appellate Tribunal (NCLAT) defeated the purpose of the IBC to resolve bankruptcy in a time-bound manner.
The government is also inviting suggestions on pre-packaged resolutions, which is taken up in case both the creditors and debtors wish to dodge the usual litigations of the resolution process in the current framework of the IBC. This will allow a company facing bankruptcy to prepare a financial reorganization plan if it has the approval of two-thirds of the creditors before filing a case at the NCLT.
