India Needs a National Insolvency Tribunal

India Needs a National Insolvency Tribunal: A Structural Imperative

The dual mandate of India’s National Company Law Tribunal (NCLT) has rendered the swift resolution promised under the Insolvency and Bankruptcy Code (IBC), 2016, a distant reality. The average duration of cases under the IBC now exceeds statutory limits by over threefold, exposing a systemic breakdown. The creation of a National Insolvency Tribunal (NIT) is not merely desirable but a necessity to rescue the spirit of India’s insolvency reform before it collapses under structural inefficiencies.

The Institutional Landscape: A Patchwork Approach to Insolvency

India's insolvency framework was revolutionized by the IBC, consolidating multiple, fragmented laws into a singular, robust regime. The IBC mandates resolution within 180 days (extendable to 330 days), placing creditors in control of the process. The legal framework comprises the Insolvency and Bankruptcy Board of India (IBBI), which regulates insolvency professionals, and adjudication primarily entrusted to the NCLT for corporate insolvencies. Debt Recovery Tribunals (DRTs) handle individual and partnership bankruptcy. However, the NCLT’s designation under Section 408 of the Companies Act, 2013, saddles it with company law disputes alongside its insolvency mandate—a dual role that has led to crippling bottlenecks.

According to the Insolvency and Bankruptcy Board of India’s 2025–26 Q2 report, the average resolution timeline has stretched to 821 days. 78% of ongoing Corporate Insolvency Resolution Processes (CIRPs) have breached the statutory 270-day limit. Meanwhile, over 61% linger beyond two years, directly contravening the purpose of time-bound adjudication. Parliamentary reports on resource shortages add operational inefficiency to the list of structural design flaws.

Structural Weaknesses in the Status Quo

The NCLT’s inefficiency stems from its original design under the Companies Act. Its infrastructure was never intended to cope with the volume and complexity of insolvency resolutions. As of October 2023, the tribunal disposed of merely 20% of pending CIRPs within prescribed timelines, stretching the average duration into years—a staggering failure to meet the IBC mandates.

Furthermore, insolvency jurisprudence lacks consistency as the tribunal deals with a broad range of unrelated matters—mismanagement cases alongside CIRPs. Fragmented administration has diminished efficiency and investor confidence. This is compounded by India’s missing cross-border insolvency framework, exposing domestic entities to risk in globalized operations.

Institutional Critique: Breach of Foundational Intent

The IBC’s theoretical promise remains valid, but its institutional delivery betrays its vision of value-maximization. By allocating insolvency adjudication to a multi-disciplinary, already-overburdened forum like the NCLT, India has diluted specialization—arguably the cornerstone of effective insolvency regimes in jurisdictions like the US or Singapore.

A 2018 Parliamentary Standing Committee report flagged staffing issues at the NCLT; subsequent recommendations for capacity expansion have remained unheeded. Without investment in personnel and infrastructure, the tribunal operates on bureaucratic inertia rather than meritocratic resolve.

International Perspective: Lessons from the US Bankruptcy Courts

The United States offers a compelling case study in adjudicatory specialization. The US Bankruptcy Courts, governed under Title 11 of the US Code, handle insolvency cases exclusively, developing jurisprudence that is both predictable and highly specialized. This specialization fosters investor confidence and improves the efficiency of the resolution process—a stark contrast to India's NCLT model.

India’s reluctance to adopt an NIT reflects a chronic underestimation of specialization’s transformative potential. What Germany calls “functional devolution” and the U.S. exemplifies in its federal structure, India subsumes under an overburdened framework, diluting both effectiveness and credibility.

The Counter-Narrative: Practical Hurdles

Critics of a National Insolvency Tribunal argue that structural transitions are expensive and disruptive. They cite the challenges faced during the creation of NCLT itself, which experienced years of delays due to procedural and resource constraints. Additionally, fears that transferring company law jurisdiction to High Courts would overwhelm an already-stretched judiciary are not unfounded.

The strongest argument against the NIT model is its reliance on rapid legislative amendments. Sections 408–434 of the Companies Act would require redrafting, alongside procedural frameworks for cross-border insolvency—a monumental task prone to delays. Yet, while these hurdles are valid, they do not negate the need for systemic reform. Implementation challenges can be mitigated by learning from India’s own phased transitions, such as the shift from High Courts to NCLTs in 2016.

Assessment and Next Steps

India’s insolvency regime is conceptually sound but structurally fragile. A National Insolvency Tribunal offers a credible solution to restore efficiency, consistency, and investor trust. Reassigning company law disputes to High Courts would simultaneously eliminate the jurisdictional ambiguities undermining the NCLT’s efficacy.

A phased approach, modeled after previous successful transitions, could smooth implementation while limiting disruption. A first step would be legislative amendment to redefine jurisdiction, followed by capacity-building measures for adjudicatory bodies. Cross-border insolvency frameworks, long on the government’s agenda, must also be prioritized to shield domestic resolution processes from global interferences.

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