India Needs a National Insolvency Tribunal

India’s Insolvency and Bankruptcy Code (IBC), 2016 was introduced as a transformative reform to resolve corporate distress in a time-bound, efficient, and value-maximising manner. While the law itself remains structurally sound, the institutional framework supporting it is under severe stress. Growing delays, capacity constraints, and jurisdictional overload have triggered a renewed policy debate: Does India need a National Insolvency Tribunal (NIT)?

This article analyses why the creation of a dedicated National Insolvency Tribunal is no longer optional but essential for preserving the credibility and effectiveness of India’s insolvency regime.

Understanding India’s Insolvency Framework

The Insolvency and Bankruptcy Code, 2016 consolidated multiple fragmented insolvency laws into a unified framework applicable to companies, partnerships, and individuals. Its core objective was to replace prolonged litigation with predictable and swift resolution.

Key Features of the IBC

• Time-bound resolution: 180 days, extendable up to 330 days

• Creditor-in-control model: Decision-making power vested in the Committee of Creditors (CoC)

• Focus on value maximisation: Prioritising revival over liquidation

• Improved credit discipline: Strengthening borrower accountability

Institutional Structure

• Insolvency and Bankruptcy Board of India (IBBI): Regulator overseeing insolvency professionals and agencies

• National Company Law Tribunal (NCLT): Adjudicating authority for corporate insolvency

• Debt Recovery Tribunals (DRTs): Handle individual and partnership insolvency

Despite this architecture, outcomes on the ground increasingly fall short of IBC’s promise.

Why the Current Insolvency System Is Under Strain

Dual Mandate of the NCLT

The NCLT was established under the Companies Act, 2013 to handle company law disputes. Soon after, it was entrusted with the responsibility of adjudicating insolvency cases under the IBC.

This dual role has resulted in:

• Overlapping jurisdictions

• Severe case pendency

• Dilution of judicial focus on insolvency matters

Rising Delays in Insolvency Resolution

One of the biggest criticisms of the current system is that IBC timelines have become aspirational rather than enforceable. A large majority of Corporate Insolvency Resolution Processes (CIRPs) now exceed statutory deadlines.

Delayed resolution leads to:

• Asset value erosion

• Reduced recovery rates

• Loss of investor confidence

Capacity Constraints

Parliamentary committees have repeatedly highlighted:

• Inadequate number of NCLT benches

• Shortage of trained judicial members

• Procedural bottlenecks and frequent adjournments

Absence of a Cross-Border Insolvency Mechanism

In a globalised economy, insolvency cases increasingly involve multinational assets and creditors. India’s lack of a specialised insolvency forum further complicates the handling of such cases.

The Case for a National Insolvency Tribunal

A National Insolvency Tribunal (NIT) would act as a specialised adjudicatory body exclusively dedicated to insolvency and bankruptcy matters.

Key Benefits of a Dedicated NIT

1. Specialisation and Expertise

A focused tribunal would allow judges to develop deep domain expertise in insolvency law, financial restructuring, and creditor rights.

2. Faster Resolution

By eliminating jurisdictional overload, insolvency cases can be resolved within statutory timelines, preserving asset value.

3. Consistent Jurisprudence

A single-purpose tribunal would promote uniform interpretation of insolvency laws, reducing legal uncertainty.

4. Improved Investor Confidence

Predictable and swift insolvency outcomes are crucial for improving:

• Credit flow

• Banking sector health

• Ease of Doing Business

5. Alignment with Global Best Practices

Countries such as the United States operate specialised bankruptcy courts, demonstrating how institutional focus improves efficiency and outcomes.

Reassigning Company Law Matters: A Structural Necessity

The establishment of a National Insolvency Tribunal must be accompanied by reallocation of company law disputes.

Proposed Reform

• Transfer company law matters like oppression, mismanagement, mergers, and capital restructuring to Commercial Divisions of High Courts.

Advantages

• Reduces NCLT workload

• Ensures company law disputes receive detailed judicial attention

• Clarifies institutional roles and jurisdictional boundaries

High Courts already handle complex commercial disputes under structured timelines, making them better suited for such cases.

Transition and Implementation Strategy

Creating a National Insolvency Tribunal would require:

• Amendments to Sections 408–434 of the Companies Act, 2013

• Procedural and rule-based changes

India has prior experience in executing large-scale institutional transitions, such as the transfer of cases from Company Law Boards and High Courts to the NCLT in 2016. A phased implementation strategy can ensure continuity, stability, and minimal disruption.

Economic and Governance Implications

A well-functioning insolvency system is critical for:

• Resolving non-performing assets (NPAs)

• Strengthening banking and financial stability

• Encouraging entrepreneurship and risk-taking

• Enhancing India’s global investment attractiveness

Failure to reform institutional mechanisms risks turning the IBC into a procedural maze rather than an economic reform tool.

Conclusion

India’s insolvency challenge is no longer legislative—it is institutional. While the Insolvency and Bankruptcy Code remains conceptually robust, its success depends on specialised, adequately empowered adjudicatory machinery.

The creation of a National Insolvency Tribunal represents the next logical step in India’s insolvency evolution. By restoring time discipline, building judicial expertise, and enhancing predictability, a dedicated tribunal can help realise the original vision of the IBC: a fast, credible, and value-maximising insolvency regime.

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