Introduction: Time Is the Most Valuable Asset in Insolvency
TheInsolvency and Bankruptcy Code, 2016 (“IBC”) is fundamentally a time-bound economic legislation. Every key provision—moratorium, CIRP timelines, fast-track processes, and even liquidation triggers—rests on the assumption that delay destroys value.
Yet, nearly a decade into its implementation, the most significant threat to value maximisation under IBC is no longer lack of bidders or weak creditor appetite, but adjudicatory delay before the NCLT and NCLAT.
While much has been written about delays within CIRP, far less attention is paid to delays around CIRP—caused by pending applications, prolonged appeals, and judicial backlog. This article argues that it is time to formally acknowledge this problem through a conceptual “NCLT/NCLAT Delay Index”, measuring how adjudicatory lag directly erodes insolvency outcomes.
Understanding the Nature of Adjudicatory Delays under IBC
Adjudicatory delays under the IBC typically arise in the following areas:
- Admission of CIRP applications
- Approval of resolution plans
- Disposal of avoidance transaction applications
- Challenges to CoC decisions
- Appeals before NCLAT, often followed by further litigation
While the Code prescribes strict timelines for insolvency processes, no equivalent discipline exists for adjudicatory disposal, resulting in systemic asymmetry.
The Concept of a “Delay Index” in Insolvency Adjudication
A Delay Index is not a criticism of the judiciary, but a diagnostic tool to quantify and understand impact.
Such an index may capture:
- Average time taken for admission of CIRP petitions
- Average time for approval of resolution plans post-CoC approval
- Pendency period of avoidance applications
- Average duration of appeals before NCLAT
- Time taken to dispose of interim applications affecting implementation
By correlating these timelines with decline in asset value, bidder attrition, and liquidation outcomes, the insolvency ecosystem can objectively assess the economic cost of delay.
How Adjudicatory Backlogs Directly Destroy Value
1. Erosion of Going-Concern Value
Businesses in CIRP operate under severe constraints:
- Restricted credit
- Vendor distrust
- Employee attrition
- Loss of customers
Each month of adjudicatory delay compounds operational stress, even when a viable resolution plan is ready and approved by the CoC.
2. Bidder Fatigue and Withdrawal
Resolution applicants require certainty:
- Delays in plan approval increase carrying costs
- Financing commitments lapse
- Market conditions change
As a result, bidders either:
- Withdraw altogether, or
- Re-negotiate value downward
Both outcomes directly reduce recoveries for creditors.
3. Liquidation Becomes a Default, Not a Choice
Extended judicial delays often push corporate debtors into liquidation—not because resolution is impossible, but because time has rendered it unviable. This outcome defeats the core objective of IBC: preservation of enterprise value.
Impact on Key Stakeholders
Financial Creditors
- Deferred recoveries reduce present value
- Increased litigation costs
- Strategic uncertainty despite CoC decisions
Ironically, the creditor-driven model loses effectiveness when creditor decisions await prolonged adjudicatory confirmation.
Insolvency Professionals
Insolvency Professionals face:
- Prolonged responsibility without corresponding authority
- Exposure to hindsight scrutiny
- Difficulty in managing stakeholders amid judicial uncertainty
Delays dilute the RP’s ability to drive resolution outcomes effectively.
Resolution Applicants
For applicants, delay translates into:
- Increased risk premium
- Lower bid aggressiveness
- Preference for non-IBC acquisitions
This weakens competitive tension in future CIRPs.
Why Procedural Rigor Alone Cannot Justify Delay
Judicial scrutiny is indispensable. However, procedural perfection achieved after irreversible value erosion serves no stakeholder.
IBC was designed to balance:
- Fairness of process, and
- Speed of outcome.
When adjudication becomes open-ended, this balance collapses, and insolvency proceedings risk resembling conventional recovery litigation.
International Perspective: Speed Is Treated as Substantive Justice
Globally:
- US bankruptcy courts prioritise early hearings and strict case calendars
- UK insolvency adjudication emphasises rapid approvals with limited appeals
- Singapore follows a highly time-disciplined restructuring model
In these jurisdictions, delay itself is treated as an injustice, not a neutral administrative issue.
The Way Forward: Institutional, Not Ad-Hoc, Solutions
Addressing adjudicatory delay requires systemic reform, not episodic fixes.
Possible measures include:
- Dedicated insolvency benches with exclusive IBC jurisdiction
- Statutory outer limits for disposal of key applications
- Fast-track approval for uncontested resolution plans
- Segregation of commercial and legal issues at appellate stages
- Technology-enabled case management dashboards for insolvency matters
Importantly, such reforms must recognise that speed is not the enemy of justice in insolvency—it is its enabler.
Conclusion: What Gets Measured Gets Managed
IBC’s success cannot be judged solely by admission numbers or recovery percentages. It must also be evaluated by time lost to adjudicatory inertia.
A formal recognition of an NCLT/NCLAT Delay Index would shift the narrative:
- From anecdotal complaints to measurable impact,
- From blame to institutional improvement,
- From procedural obsession to economic outcomes.
If insolvency resolution is to remain a credible alternative to liquidation, time discipline in adjudication must be treated as a core insolvency reform—not an administrative afterthought.
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Author Note: The author is an Insolvency Resolution Professional with extensive experience in managing multiple CIRP and liquidation assignments. For queries or professional discussions related to the Insolvency and Bankruptcy Code (IBC), you may reach out to: Krit Narayan Mishra at kritmassociates@gmail.com | +91 99108 59116.
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