Proposed IBC amendments risk weakening insolvency framework: Nagarkurnool MP
New Delhi: Nagarkurnool MP Mallu Ravi on Wednesday, March 25, raised serious concerns over the proposed amendments to the Insolvency and Bankruptcy Code (IBC), warning that the Bill in its current form could undermine the foundational principles of India’s insolvency resolution framework.
Speaking on the amendments, Ravi said the changes dilute the institutional strength of the insolvency resolution process by moving away from the core objective of preserving and maximising asset value for all stakeholders. He expressed particular concern over proposals that would subordinate the role of the liquidator to the Committee of Creditors (CoC).
“The earlier framework ensured a fair and balanced approach by empowering the liquidator with quasi-judicial authority. Subordinating this role to the CoC risks undermining neutrality and due process, while concentrating excessive power in the hands of financial creditors,” he said.
The MP also flagged concerns with the proposed Creditor-Initiated Insolvency Resolution Process (CIIRP), arguing that its continued reliance on payment default as a trigger rather than enabling early intervention allows value erosion to set in before corrective action can begin. He said the mechanism also creates inequity by excluding operational creditors and certain financial creditors from initiating proceedings, narrowing access and reducing transparency.
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Turning to cross-border insolvency provisions, he cautioned against excessive delegation of legislative powers to the executive, urging Parliament to lay down clear guiding principles rather than transplanting global frameworks such as UNCITRAL without adapting them to Indian realities, including judicial delays and promoter-driven litigation.
Ravi also took issue with the amendments’ emphasis on strict timelines without adequately addressing systemic constraints such as tribunal backlogs, infrastructure gaps and institutional capacity. “Speed cannot come at the cost of fairness and practicality,” he remarked.
While welcoming the introduction of a framework for handling insolvency across corporate groups as a positive step, he cautioned that the lack of clarity on substantive consolidation and the definition of a “group” could trigger further litigation and ambiguity.
“The IBC must remain a tool for genuine insolvency resolution, not merely a mechanism for debt recovery. Without parallel reforms in judicial efficiency, institutional capacity and regulatory clarity, these amendments risk falling short of their intended goals and may, in fact, lead to increased disputes,” the MP said.
He called on the government to undertake wider consultations to ensure the amendments strengthen, rather than dilute, India’s insolvency ecosystem.
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