IBC vs CIRP Delays

 The Insolvency and Bankruptcy Code, 2016 (IBC) was introduced with a clear and ambitious objective: to ensure time-bound resolution of corporate insolvency, maximize value of assets, and balance the interests of all stakeholders. Nearly a decade later, while the IBC has transformed India’s insolvency ecosystem, a critical question continues to surface, can the IBC still achieve time-bound resolution when delays in the Corporate Insolvency Resolution Process (CIRP) are increasingly common?


This blog examines the causes of delay in CIRP, judicial responses, and whether the original promise of the IBC remains achievable in practice.

Understanding CIRP and Its Statutory Timelines

Under Section 12 of the IBC, the Corporate Insolvency Resolution Process must be completed within 180 days, extendable by 90 days, making a total of 270 days. In exceptional cases, a further extension of 60 days may be allowed, capping the process at 330 days, including litigation.

This strict timeline was designed to prevent erosion of asset value, a problem that plagued earlier recovery mechanisms such as the Debt Recovery Tribunal (DRT) and company court winding-up proceedings.

However, despite these statutory limits, many Corporate Insolvency Resolution Process cases extend well beyond the prescribed period.

Why Is CIRP Facing Delays?

1. Prolonged Litigation

One of the biggest contributors to delay is extensive litigation at various levels, NCLT, NCLAT, High Courts, and the Supreme Court through Special Leave Petitions (SLP). Challenges arise at almost every stage:

  • Admission of insolvency applications

  • Appointment of Resolution Professionals

  • Approval or rejection of resolution plans

  • Allegations of procedural irregularities

While judicial oversight is essential, excessive litigation often defeats the objective of speed.

2. Capacity Constraints at NCLT

The National Company Law Tribunal (NCLT) plays a central role in insolvency resolution. However, infrastructure and manpower shortages have led to significant backlogs. Many benches are overburdened, making it difficult to strictly adhere to Corporate Insolvency Resolution Process (CIRP) timelines.

For an NCLT insolvency lawyer, procedural delays have become a practical challenge, despite the Code’s strict framework.

3. Complexity of Corporate Structures

Modern corporations often have – multiple subsidiaries, cross-border assets and inter-creditor disputes

Resolving such cases within a rigid timeframe is difficult. Large insolvencies require extensive due diligence, negotiations, and regulatory approvals, all of which consume time.

4. Delays Caused by Resolution Applicant

Resolution Applicants sometimes seek repeated extensions for – Conducting due diligence,Securing regulatory approvals, Renegotiating financial terms. While flexibility is sometimes necessary to ensure value maximization, it often comes at the cost of delay.

5. Parallel Proceedings Under Other Laws

Despite the IBC’s overriding effect, creditors sometimes initiate or continue parallel proceedings such as-  Cheque bounce cases under Section 138 of the Negotiable Instruments Act, recovery proceedings before the Debt Recovery Tribunal, though moratorium under Section 14 restricts many actions, interpretational disputes still lead to litigation and delay.

Conclusion

While delay in CIRP is a genuine concern, it does not signal the failure of the Insolvency and Bankruptcy Code. The IBC remains India’s most effective framework for corporate insolvency and resolution, outperforming legacy systems like the Debt Recovery Tribunal and cheque bounce litigation.

The challenge lies not in the law itself, but in its implementation and enforcement. With continued reforms, judicial discipline, and professional efficiency, the IBC can still fulfill its promise of time-bound resolution, balancing speed, fairness, and value maximization.

For businesses, creditors, and insolvency professionals alike, the IBC remains a work in progress—but one that continues to shape the future of insolvency law in India.

Source ulr: https://foresightlawoffices.com/delay-in-corporate-insolvency-resolution-process-can-the-ibc-still-achieve-time-bound-resolution/

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