Delay in Corporate Insolvency Resolution Process: Can the IBC Still Achieve Time-Bound Resolution?

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.

Judicial Interpretation: Balancing Speed and Justice

Indian courts have consistently recognized that timelines under IBC are mandatory, not merely directory. In landmark judgments, the Supreme Court emphasized that delay defeats the very purpose of the Code.

At the same time, courts have also clarified that:

• Timelines cannot override principles of natural justice

• Exceptional circumstances may justify limited extensions

This balancing act has led to mixed outcomes, while some cases are resolved efficiently, others remain stuck in procedural limbo.

Impact of Delay on Stakeholders

Stakeholder	Impact of Delay in Corporate Insolvency Resolution Process
Creditors	Delays reduce recovery value and increase uncertainty. Financial creditors, operational creditors, and government authorities face prolonged wait times for resolution, affecting cash flows and balance sheets.
Corporate Debtors	Extended CIRP often leads to business stagnation, loss of employees and key contracts, erosion of market confidence, and a significant decline in overall enterprise value.

Instead of revival, prolonged insolvency may push companies closer to liquidation.

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Is IBC Still Better Than Earlier Recovery Mechanisms?

Despite delays, the IBC remains significantly more effective than pre-IBC regimes.

Even with delays, corporate insolvency under IBC has delivered better recoveries and discipline compared to earlier systems.

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Recent Reforms and Corrective Measures

The government and judiciary have taken steps to address delays:

1. Increased NCLT Capacity

One of the primary reasons for delay in the Corporate Insolvency Resolution Process (CIRP) has been the overburdened National Company Law Tribunal (NCLT). To address this structural challenge, the government has taken steps to enhance the capacity of the NCLT.

The appointment of more judicial and technical members has helped distribute the caseload more evenly across benches. With increased manpower, NCLT is better equipped to:

• Hear insolvency matters more frequently

• Reduce adjournments caused by non-availability of benches

• Ensure faster admission, monitoring, and closure of CIRP cases

This directly supports the IBC’s objective of time-bound corporate insolvency resolution.

The establishment of additional NCLT benches in various regions has improved accessibility and reduced regional backlogs. New benches help by:

• Lowering the number of cases per bench

• Reducing delays caused by jurisdictional overcrowding

• Enabling quicker disposal of urgent insolvency applications

For creditors and corporate debtors alike, enhanced NCLT capacity translates into greater procedural efficiency and predictability.

2. Pre-Packaged Insolvency (Pre-Pack)

To further address delays in traditional CIRP, the Insolvency and Bankruptcy Code introduced Pre-Packaged Insolvency Resolution Process (PPIRP), particularly for Micro, Small and Medium Enterprises (MSMEs).

Unlike regular CIRP, pre-pack insolvency allows the debtor and creditors to negotiate a resolution plan before formally approaching the NCLT. This significantly reduces the time spent on:

• Identifying resolution applicants

• Conducting negotiations

• Revising resolution plans

As a result, the overall insolvency process becomes substantially quicker, while still remaining within the IBC framework.

In a pre-pack process, the role of the NCLT is largely supervisory rather than managerial. Since most commercial decisions are finalized prior to filing, the tribunal primarily reviews compliance and approves the plan. This reduces litigation, limits procedural delays and preserves business continuity

Pre-pack insolvency reflects a shift toward a more pragmatic and market-driven approach, balancing speed, creditor interests, and business revival.

This reflects a shift toward speed with flexibility.

The Way Forward: Can Time-Bound Resolution Be Restored?

To ensure that IBC achieves its original goal, several steps are necessary:

Recommended Measure	Explanation
Stricter Adherence to Timelines	Courts should restrict extensions of CIRP timelines to truly exceptional circumstances. This ensures that insolvency proceedings do not become open-ended and remain aligned with the IBC’s objective of time-bound resolution.
Technology-Driven Case Management	Adoption of digital filings, e-hearings, and automated case scheduling can significantly reduce procedural delays, improve transparency, and enhance efficiency in NCLT proceedings.
Greater Deference to Commercial Wisdom of CoC	Judicial intervention should be minimal once the Committee of Creditors exercises its commercial judgment, as excessive interference can lead to prolonged litigation and delay resolution.
Strengthening Pre-Pack and Out-of-Court Restructuring	Encouraging pre-packaged insolvency and other out-of-court restructuring mechanisms can reduce the caseload of NCLT and enable faster, consensual resolution of financial distress.

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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.