National Insolvency Tribunal

India urgently requires a National Insolvency Tribunal (NIT) to uphold the promise of swift and effective resolution envisioned under the Insolvency and Bankruptcy Code (IBC), 2016. Although the IBC introduced a modern, creditor-driven, and time-bound insolvency framework, the existing institutional structure is increasingly unable to meet statutory timelines, thereby diluting the objectives of the Code.

Overview of India’s Insolvency Framework

India’s insolvency regime underwent a transformative change with the enactment of the Insolvency and Bankruptcy Code, 2016. The Code consolidated multiple fragmented laws governing insolvency and bankruptcy of companies, partnerships, and individuals into a unified framework aimed at improving ease of doing business and credit discipline.

Key Features of the Insolvency and Bankruptcy Code

A defining feature of the IBC is its time-bound resolution process, which mandates completion within 180 days, extendable up to 330 days in exceptional circumstances. This timeline seeks to preserve asset value and prevent prolonged litigation.

The Code also introduced a creditor-in-control model, whereby financial creditors, acting through the Committee of Creditors (CoC), control the resolution process, replacing the earlier debtor-in-possession system.

Institutional Framework Under the IBC

The IBC is supported by a multi-tier institutional framework. The Insolvency and Bankruptcy Board of India (IBBI) functions as the apex regulator overseeing insolvency professionals, agencies, and information utilities. The National Company Law Tribunal (NCLT) serves as the adjudicating authority for corporate insolvency cases, while Debt Recovery Tribunals (DRTs) deal with insolvency of individuals and partnership firms.

Challenges in the Current Insolvency Framework

Dual Mandate of the NCLT

The NCLT was originally established under the Companies Act, 2013 to adjudicate company law disputes. However, soon after its creation, it was designated as the primary adjudicating authority for corporate insolvency under the IBC. As a result, the NCLT currently handles both company law matters and insolvency cases, leading to a structural overload and dilution of focus.

Systemic Inefficiency in IBC Implementation

According to the IBBI’s Q2 2025–26 Newsletter, the average time taken from initiation to approval of a resolution plan stands at 821 days, or 688 days after excluding permitted delays. Nearly 78 percent of ongoing Corporate Insolvency Resolution Processes (CIRPs) have exceeded the statutory 270-day limit, and 61 percent have crossed two years, undermining the time-bound spirit of the IBC.

Capacity Constraints and Procedural Delays

The Parliamentary Standing Committee on Finance has highlighted severe capacity constraints, including shortages of judicial members, infrastructure gaps, and procedural inefficiencies. These issues have resulted in mounting backlogs and prolonged litigation.

Emerging Challenges such as Cross-Border Insolvency

India also lacks a comprehensive cross-border insolvency framework, which has become increasingly relevant in a globalised economy where companies operate across jurisdictions. The absence of specialised adjudicatory capacity further complicates such cases.

Case for a National Insolvency Tribunal

The creation of a dedicated National Insolvency Tribunal represents the next logical step in the evolution of India’s insolvency regime. Such a tribunal would deal exclusively with insolvency and bankruptcy matters, allowing the development of specialised expertise and consistent jurisprudence.

A focused tribunal would enable faster resolutions, predictable outcomes, and improved creditor and investor confidence. International experience, particularly the United States Bankruptcy Courts, demonstrates that institutional specialisation significantly enhances efficiency and consistency in insolvency resolution.

Reassigning Company Law Matters to High Courts

The establishment of a National Insolvency Tribunal would require the transfer of company law matters, especially cases related to oppression, mismanagement, and capital restructuring, to the commercial divisions of the High Courts.

High Courts are already equipped to handle complex, high-value commercial disputes within structured timelines. This reallocation would reduce the burden on the NCLT, ensure focused adjudication of company law disputes, and restore clear jurisdictional boundaries among adjudicatory bodies.

Transition and Implementation Strategy

Transitioning to a National Insolvency Tribunal would require amendments to Sections 408–434 of the Companies Act, 2013, along with related procedural rules. India has successfully managed similar institutional restructuring in the past, notably in 2016, when jurisdiction was shifted from the Company Law Board and High Courts to the NCLT.

A phased implementation strategy, drawing from that precedent, would help ensure continuity, institutional stability, and minimal disruption during the transition.

Conclusion

India’s insolvency framework under the IBC remains conceptually strong and globally competitive. The primary challenge lies not in the law itself, but in aligning institutional capacity and design with the Code’s original intent. The establishment of a National Insolvency Tribunal would be a decisive step towards realising a fast, predictable, and value-maximising insolvency regime, thereby strengthening India’s financial system and investment climate.