IBC Reforms Push 90-day Deadline for NCLAT Appeals

India’s insolvency framework was born out of impatience. When the Insolvency and Bankruptcy Code (IBC) was enacted in 2016, it was a direct response to years of value destruction caused by endless litigation, weak creditor rights, and an economy weighed down by zombie companies. Eight years on, that impatience has returned, this time aimed squarely at the appellate process.

The Lok Sabha select committee’s recommendation to impose a strict three-month deadline on the National Company Law Appellate Tribunal (NCLAT) to dispose of insolvency appeals is, at first glance, a technical fix. It goes to the heart of whether India’s bankruptcy regime can still deliver on its founding promise: speed, certainty and value maximisation.

The committee has diagnosed a problem that practitioners have complained about for years. While the IBC imposes hard timelines on the National Company Law Tribunal (NCLT) for completing corporate insolvency resolution, the appellate layer has remained conspicuously open-ended. Appeals against rejected claims, approved resolution plans, or liquidation orders can linger for months, sometimes years, effectively freezing the fate of distressed companies.

In insolvency, delay is not a neutral factor. Every month of uncertainty erodes enterprise value, scares away bidders, and tightens the grip of liquidation as the default outcome. A binding three-month deadline for NCLAT appeals is therefore not just about efficiency; it is about preserving economic value that would otherwise evaporate in procedural limbo.

Yet deadlines on paper are only as effective as the institutions enforcing them. NCLAT already struggles with capacity constraints, rising caseloads, and frequent vacancies. Imposing a statutory timeline without parallel investment in judicial strength risks turning the reform into a compliance fiction; met in form, violated in practice. If appeals are rushed without adequate hearings, the result could be more litigation, not less.

That said, the committee’s recommendation sends an unmistakable signal: appellate delay can no longer be treated as an acceptable cost of due process. In a system designed around strict timelines, one leaky valve is enough to flood the entire mechanism.

Equally significant is the committee’s proposal to bar resolution professionals (RPs) from acting as liquidators for the same company. This is a rare acknowledgment of incentive design, a concept often ignored in Indian regulatory reform. The concern is straightforward: while RPs are paid fixed fees during resolution, liquidators earn a percentage of asset sale proceeds. The fear that this could subconsciously tilt decisions toward liquidation rather than revival is not far-fetched.

By separating these roles, the amendment attempts to restore faith in the neutrality of the resolution process. Whether this concern is widespread or merely hypothetical is almost beside the point. Insolvency systems thrive on trust, among creditors, investors and courts, and perceived conflicts can be as damaging as real ones.

Beyond these headline changes, the proposed amendments reveal a quiet but important evolution in how India views corporate distress. The introduction of group insolvency and cross-border frameworks reflects an acceptance that modern business failures rarely occur in isolation. Conglomerates collapse as ecosystems, not standalone entities. Coordinated resolution across group companies and jurisdictions is no longer an aspirational idea borrowed from global best practice; it is becoming a practical necessity for India’s increasingly interconnected economy.

The proposed Creditor-Initiated Insolvency Resolution Process is another notable shift. By enabling out-of-court mechanisms for genuine business failures, the law recognises that not all insolvencies require the heavy hand of formal proceedings. If designed well, this could reduce litigation costs, preserve business continuity, and unclog tribunals already under strain.

Perhaps the most quietly powerful reform is the empowerment of creditors to pursue questionable pre-bankruptcy transactions even if the resolution professional does not act. This weakens the ability of errant promoters to game the system through asset stripping and cosy settlements, and it places recovery tools directly in the hands of those with the most at stake.

Taken together, these amendments suggest that the IBC is entering a second phase of maturity. The initial years were about establishing creditor primacy and discipline. The current phase is about refinement like fixing incentives, closing loopholes and aligning legal timelines with economic reality.

The three-month NCLAT deadline stands as the symbolic centrepiece of this effort. If implemented alongside serious capacity building, it could restore confidence among investors and lenders that India’s insolvency process will not stall at the appellate gate. If not, it risks becoming another well-intentioned provision undermined by institutional inertia.

In insolvency law, speed is not a luxury; it is the system’s oxygen. India’s lawmakers seem to understand that once again. The harder task lies ahead: ensuring that the machinery of justice can move as fast as the law now demands.