IBC Reforms Losing Momentum as NCLT Backlog Mounts to 30,600 Cases, Economic Survey 2025–26 Warns
- REEDLAW
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REEDLAW Legal News Network reports: The Economic Survey 2025–26 has raised serious concerns over the effectiveness of India’s insolvency framework, warning that mounting delays at the National Company Law Tribunal (NCLT) are diluting the intended impact of the Insolvency and Bankruptcy Code, 2016 (IBC). As of March 2025, nearly 30,600 cases were pending before the NCLT, a backlog that could take close to a decade to resolve at the current pace of disposal, with significant implications for asset value preservation and credit recovery.
The Survey cautioned that prolonged delays in insolvency proceedings lead to erosion of enterprise value and weaken the broader financial system. It observed that extended resolution timelines result in asset depreciation, employee attrition, loss of customers to competitors, and breakdown of supplier relationships—outcomes that run counter to the IBC’s core objective of time-bound resolution aimed at maximising value and enforcing credit discipline.
Despite the IBC being recognised as a major reform intended to accelerate loan recovery and strengthen the banking sector, the Survey noted that institutional bottlenecks at the NCLT level have diluted its impact. Although the Central Government introduced amendments to the Code in the previous year to address procedural inefficiencies, the Survey indicated that it remains uncertain whether these changes will substantially improve outcomes on the ground.
A key area of concern highlighted in the Survey is the structural inadequacy of the NCLT ecosystem. As of early 2026, there are 16 National Company Law Tribunal (NCLT) benches across India adjudicating matters under the Companies Act and the Insolvency and Bankruptcy Code (IBC). These benches together operate a total of 30 individual courts or divisions to manage the combined caseload. This limited adjudicatory capacity has been unable to keep pace with the growing volume and increasing complexity of insolvency filings. The Survey further pointed out that systemic constraints are not confined to tribunals alone, but extend to the insolvency professional framework as well.
Of the 4,527 registered Resolution Professionals (RPs) in India, only 2,198—approximately 49 per cent—are authorised for active assignments. Resolution Professionals, appointed by the NCLT, play a critical role in managing the corporate insolvency resolution process (CIRP), including asset preservation, conduct of the resolution process, and facilitation of liquidation where required. The limited availability of active RPs has further contributed to delays and procedural congestion.
Under the IBC, the CIRP is required to be completed within 330 days, including litigation periods. However, the Survey revealed that the average duration of CIRP stands at 713 days, more than double the statutory limit. In cases closed during the financial year 2025, the average resolution time extended to 853 days, representing a delay of over 150 per cent beyond the prescribed timeline.
The Survey underscored that such delays have far-reaching macroeconomic consequences. Prolonged insolvency proceedings lock up productive capital, adversely affecting the health of the banking sector by constraining lenders’ ability to recycle funds into fresh credit. This, in turn, hampers overall economic growth and weakens confidence in the insolvency regime.
The Survey also examined the performance of the Pre-Packaged Insolvency Resolution Process (PPIRP), introduced in 2021 as a faster, simpler, and cost-effective alternative for micro, small and medium enterprises (MSMEs). While PPIRP was envisaged as a streamlined mechanism, its adoption has remained limited due to procedural complexity, lack of awareness among MSME stakeholders, and funding constraints faced by smaller enterprises.
Overall, the Economic Survey 2025–26 delivers a clear warning that without significant strengthening of adjudicatory capacity, professional infrastructure, and procedural efficiency, the promise of the IBC risks being diluted. While legislative intent remains robust, effective insolvency reform ultimately depends on timely resolution—an objective that continues to be challenged by systemic delays within the NCLT framework.
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