Abstract
Insolvency professionals play key roles, such as resolution professionals, bankruptcy trustees and liquidators. They facilitate the implementation of the Insolvency and Bankruptcy Code (IBC), ensuring efficiency, transparency and credibility. The core objectives of IBC—resolution and maximization of value—are realized through corporate restructuring and asset recovery, led by insolvency professionals. However, limited academic attention has been given to the practical challenges, which this article examines through a qualitative approach. Semi-structured interviews were conducted with insolvency professionals and analysed. Key challenges include regulatory complexity, information gaps, valuation issues, creditor negotiations, structural ambiguity and reputation risks. The findings suggest areas for policy improvement.
Executive Summary
Insolvency professionals (IPs) play a pivotal role in implementing the Insolvency and Bankruptcy Code (IBC), ensuring the effortless exit of distressed firms and the reallocation of resources. They serve as agents of ‘creative destruction’, achieving resolution and value maximization largely through corporate restructuring and asset recovery. However, academic attention rarely focuses on the challenges faced by the IPs in facilitating these processes. Thus, the article investigates these professional challenges faced by insolvency practitioners in India. Interviews were conducted with 20 IPs who have over 20 years of restructuring experience in the pre-IBC era and have managed more than 15 corporate insolvency resolution process (CIRP) cases in the post-IBC regime. Semi-structured questions were used to ensure consistency while allowing flexibility in the research process. The key findings were then coded and analysed using NVivo version 12. Information gaps, regulatory deficiencies and complexities, non-cooperation from stakeholders and lack of awareness about the IP profession emerged as the major challenges in the profession. Moreover, integrity issues, technological deficiencies, filing complications and a lack of interim finance also contributed to the hurdles in the profession. In contrast to studies that primarily examine the outcomes of the IBC, the present study focuses on the practical challenges faced by IPs in insolvency processes. The study also provides actionable, experience-based recommendations to policymakers and regulators to strengthen the insolvency ecosystem. It calls for improved information recovery from suspended management, enhanced powers and manpower of the NCLT, faster regulatory approvals, clearer statutory rights and obligations of stakeholders, better-trained judges and professionals and robust digital and procedural standardization. The study had also demanded a systematic code of conduct for the Committee of Creditors and a forum for the IPs to raise their concerns.
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Being an Insolvency professional means, you are placed in a pressure position. With great power comes great responsibilities. But such powers can be exercised and responsibilities can be discharged only with the cooperation of all the stakeholders involved in the reorganization process. But, in reality, we are targeted, arrested, blackmailed, and even put behind bars without due reasons that arise from sheer ignorance about this profession. It’s woeful. (A quote from Respondent 16)
Keywords
This quote is a typical example of the unresolved challenges faced by insolvency professionals over the years, which have rarely caught the attention of academia and researchers.
Restructuring and recovery, regarded as the twin agents of economic change, represent the final stage of creative destruction (Caballero & Hammour, 2000). These processes remove outdated firms from the market (Schumpeter, 1942) and redirect resources to more viable projects (Shekar & Guru, 2020). Asset valuation, recovery and distribution complete the reorganization process. This creates maximum value for creditors competing for the borrower’s remaining assets (refer to IBBI, 2022). Since the production of wealth depends on an effective credit system, it is difficult to eliminate the debt and credit mechanisms completely. Therefore, to strengthen market economies, a system to bear their repercussions is essential (Finch, 1997). A well-structured insolvency regime can rescue and rehabilitate viable organizations, assisting countries to achieve economic development (Sahoo & Guru, 2020). Many countries amended bankruptcy laws and restructuring frameworks during crises, especially pandemics. Yet, insolvency frameworks still face deficiencies in tackling distress (Bridge Zoller, 2023; Tirado, 2023). The introduction of pre-packs in 2021 marked a significant step by India in reducing the difficulties experienced by micro, small and medium enterprises during COVID-19 (Kavitha, 2022).
India introduced the Insolvency and Bankruptcy Code in 2016 (IBC, 2016) 1 to consolidate the fragmented legal framework and improve the resolution of stressed assets. It also aimed to enhance credit market efficiency and promote economic growth (Sahoo & Guru, 2020). This legislation focuses on two key objectives: timely resolving insolvency and maximizing asset value. Unlike the prior approach of immediate insolvency and liquidation, the IBC provides viable firms with opportunities to reorganize through corporate restructuring. This involves making structural changes or rearrangements in the governance mechanism of an organization (Sharma, 2021).
Although asset recovery is not the primary goal of IBC (IBBI & International Finance Corporation (IFC), 2020), the proportion of upfront recoveries and recovery in cash significantly influences the creditor’s acceptance of resolution plans (Fisher & Martel, 1995). However, prioritizing long-term, sustainable recoveries by the Committee of Creditors (CoCs) ensures continuity, preservation of jobs and generation of cash flows. This ultimately enhances stakeholder value over time (Kanojia & Gupta, 2025). Moreover, recovery rates through effortless bankruptcy processes can positively affect entrepreneurship, venture formation and growth (Eberhart et al., 2016). Adjudicating authorities (National Company Law Tribunal, National Company Law Appellate Tribunal), along with insolvency professionals (IPs) and insolvency professional entities (IPEs) functioning under the supervision of the Insolvency and Bankruptcy Board of India, strive hard to revive and rehabilitate businesses (IBBI & IFC, 2020).
IPs, who are enrolled as members of an Insolvency Professional Agency and registered with the Board (IBC, ss 3[19], 206, 207), play a pivotal role in ensuring the credibility, efficiency and timely operation of the insolvency system (IBBI, 2015). They perform diverse functions—resolution professionals (RPs) during resolution and as bankruptcy trustees or liquidators when the reorganization efforts fail (IBBI, 2015; IIIPI, 2023a).
The roles and duties of the IPs can be summarized under three heads:
RP also manages the debtor’s operations until a resolution or liquidation (IBC, ss 22, 23). Other duties include conducting CoC meetings (IBC, s 24), controlling assets and representing the debtor in legal proceedings. RP can raise interim finance, appoint professionals and maintain claims lists (IBC, s 25). RP prepares an Information Memorandum, evaluates resolution plans and files avoidance applications (IBC, s 25). RPs must ensure that resolution plans comply with the IBC provisions, secure CoC decisions and are submitted to the adjudicating authority for approval (IBC, ss 30, 31).
Additionally, a liquidator will form a liquidation estate of the CD (IBC, s 36), access information to verify claims, identify assets and provide information to the interested parties (IBC, s 37). Most importantly, the liquidator should act with due diligence in distributing the proceeds among creditors, adhering to the waterfall mechanism (IBC, s 53).
The core objectives of resolution and value maximization are realized through corporate restructuring and asset recovery, which are diligently managed by IPs. As an RP, reorganization efforts lead to revival, while recovery results in maximizing asset value. As bankruptcy trustees in individual or partnership cases, IPs focus on asset recovery, management and liquidating assets to resolve debts. As liquidators in corporate cases, IPs focus solely on asset recovery, ensuring optimal monetization of assets and distributing the proceeds based on the waterfall mechanism (IBC, s 53). Thus, corporate restructuring and asset recovery are operationally significant for IPs in achieving the fundamental goals of IBC.
However, in practice, IPs face several bottlenecks in corporate restructuring and asset recovery (Mittapally & Jayaram, 2020). Previous research, especially in the Indian context, has shown limited academic interest in exploring the challenges faced by this significant group of professionals. Thus, this study aims to identify various key challenges IPs face in these realms. It adopts a thematic approach based on IP testimonies. The study also put forward valuable recommendations to address these issues.
LITERATURE REVIEW
Capitalist reality is characterized by continuous change, driven by new technology, innovative products, novel supply methods and new forms of organizations. These forces lead to improved productivity and a higher standard of living (Schumpeter, 1942). Innovation is hampered when organizations operate in a ‘routinized regime’ rather than an ‘entrepreneurial regime’. This results in less innovative incumbents (Almudi et al., 2013, 2020; Cefis et al., 2021; Dosi et al., 2017). Firms should adapt to changes around them and move beyond the static equilibrium frameworks to thrive in the market. Embracing the concept of Schumpeter’s ‘Gale of Creative Destruction’ helps organizations to respond to these dynamic market forces (Holcombe, 2022).
‘Exit’, a key element in the dynamic economy, is widely examined from two perspectives: theoretically, using evolutionary models, and empirically, through mixed longitudinal analyses (Cefis et al., 2021). Exit is mainly based on two factors. The first is based on the entry and exit barriers called ‘Revolving Door’ metaphor (Audretsch, 1995; Dunne et al., 1988). Due to a lack of innovation, this mostly affects adolescent industries (Cefis et al., 2021; Manjón-Antolín, 2010). The second factor is based on innovation known as the ‘Gale of Creative Destruction’ (Schumpeter’s Gale). In the Schumpeterian Gale, innovation drives out the old firms. This brings radical changes at the industry’s core (Manjón-Antolín, 2010) and affects mature and infant firms (Cefis et al., 2021). In this process, firms that lack innovation shrink, while those that innovate and offer improved products attain accelerated growth. Thus, reallocating capital and labour to the expanding firms is crucial (Keuschnigg & Kogler, 2022) to foster the aggregate productivity levels (Greenaway et al., 2009). These shifts are important for business continuity, but also make some firms vulnerable to creative destruction (Muñoz-Dueñas et al., 2024).
Economic disruptions disturb production and employment, leading to the closure of inefficient firms. However, high set-up costs prevent new firms from emerging in their place, negatively impacting plants and employment (Caballero & Hammour, 1994). Innovation activities declined significantly during the crises in most transition economies (Friz & Günther, 2021). Failure originates from internal and external factors (Lukason & Hoffman, 2014). These causes range from internal mismanagement to global recession. Among these factors, firm management often emerges as the prime reason (Dubrovski, 2009). Organizations may fail due to several factors, including operational mismanagement, poor debt management, increased costs, under-capitalization and changes in the business environment (Hall, 1992). Recessionary pressures and competitive rivalry (Arora & Saurabh, 2022) can also lead an organization to failure.
When a firm struggles to meet its financial obligations using its cash flows, it is in financial distress (Putri & Dhini, 2019). Without proper policies, it might escalate into a structural default (Gennaro, 2021). An organization’s credit risk profile may be impacted by distress if it fails to make obligatory payments, such as interest and debt (Gordon, 1971; Sewpersadh, 2022). Since a major portion of their pre-distress value is now redirected to manage these expenditures, bankruptcy costs also affect their capacity to function effectively. Moreover, real owners, direct creditors and related potential claimants suffer losses due to a decline in the value of interest and its related characteristic changes (Branch, 2002). Thus, an efficient insolvency regime is crucial for liquidating or restructuring firms to maximize value (Cirmizi et al., 2012).
Experiences from countries like South Korea, Malaysia and Indonesia demonstrate the vital role of reformed bankruptcy laws in maintaining financial stability during economic crises and debtor defaults (Cirmizi et al., 2012). Efficient insolvency regimes are essential for maximizing productivity gains from firm exits. Such insolvency systems should balance debtor-creditor incentives, maintain efficiency at all stages and prioritize future income. To maintain economic stability, it should also prioritize early warning systems, adjust to local circumstances, reduce restructuring barriers and encourage innovation (Adalet McGowan & Andrews, 2018).
Nations differ in their approach to insolvency and entrepreneurship. Greece and Italy support necessity-driven businesses, while the USA and Japan encourage innovation-driven entrepreneurship. However, in Sweden and Germany, both models operate in a balanced state (Fu et al., 2020). European Union countries, particularly Austria, Belgium, Spain, Greece, Italy, Germany and Portugal, prioritize corporate restructuring over liquidation in the insolvency procedures (Closset et al., 2023). The United Kingdom and Germany provide flexible systems that balance the interests of creditors and debtors, whereas the US system strongly emphasizes debtor rehabilitation. In France, there is a protective stance towards debtors. However, the framework lacks provisions for binding the dissenting creditors. This reduced the effectiveness of restructuring outcomes (Eidenmüller, 2023).
Corporate restructuring addresses these problems, enhancing creditor coordination, controlling hold-out behaviour and enabling closure of unviable firms (Gertner & Scharfstein, 1991; White, 1989). It is the strategic change in the company’s structure, procedures or financial systems to restore prosperity. It helps the organization to face challenges and attain long-term success in dynamic markets (Denis & Kruse, 2000; Dzingirai, 2021; Vo et al., 2024). Restructuring includes the financial, operational and strategic restructuring to improve firm performance (Gaughan, 2017). Financial restructuring modifies the capital structure to increase liquidity and lessen financial hardship (Denis & Kruse, 2000; Dzingirai, 2021). However, operational restructuring affects employee morale and innovation while increasing efficiency through cost reduction (Girod & Karim, 2017; Githaiga, 2021; Sebastian et al., 2017). Spin-offs and divestitures in strategic restructurings enhance attention to cash flows and core competencies (Cheng et al., 2023). The additional benefits associated with corporate reorganization include customer satisfaction, cost reduction and managerial efficiency (Florio et al., 2018). However, asset recovery—a basic tool in restructuring debts—is challenged by admission issues, deregulated insolvency practitioners and inadequate judicial settings. Management of poor asset registries, especially in cross-border insolvency, also makes asset recovery more difficult (Brun & Silver, 2020). The tracing process is complicated by various regulations among member states, necessitating cooperation with international courts (European Commission, 2022). Standardizing asset tracing tools through international frameworks can improve cross-border cooperation and strengthen recovery outcomes (Sarra et al., 2023).
India’s corporate insolvency laws evolved from the Industrial Development and Regulation Act of 1951 and the Companies Act of 1956. Over time, fragmented laws, such as the Sick Industrial Companies (Special Provisions) Act of 1985, the Recovery of Debts Due to Banks and Financial Institutions Act of 1993, and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002, created multiple proceedings across authorities. This led to unnecessary delays and reduced creditor recoveries. The absence of a unified mechanism to restructure or close non-viable firms prompted the introduction of the IBC in 2016 (Das et al., 2020). The new code has brought about positive outcomes—maximization of asset value, faster resolutions, lower costs and credit market efficiency. It also reduced the proportion of non-performing assets and increased stakeholder confidence through positive behavioural changes among firms (Sahoo & Guru, 2020). However, various challenges exist. These challenges include difficulties in examining affairs of the CD, the determination of avoidance transactions, and the non-cooperation of the CD. Other challenges include a lack of uniform standards and quality concerns in valuation, destroying market efficiency (Saini, 2019).
IPs in India face several other challenges, including limited business knowledge, inadequate specialization, poor cooperation from management and role ambiguities. Decision-making hurdles and a gender–pay gap further worsen the issues (Mittapally & Jayaram, 2020). High costs, social stigma and lack of awareness among businesses, especially SMEs, also hinder the insolvency proceedings. Broader issues like inadequate support systems, legal complexities and adverse market conditions demand reforms beyond pandemic-related impacts (Sahoo, 2020). Experts admit that systemic issues impact the overall process and pose challenges for the IPs for managing the cases (IIIPI, 2023a). These challenges include navigating the CoC’s operational dynamics, delays in approvals, ambiguities in CoC and IP roles and IP replacement complexities. Other issues like marginalization in dormant cases, legal intricacies, data gaps and lack of interim finance (Baxi, 2023) also intensify the situation. Inadequate infrastructure and difficulties implementing the resolution plan add to the strains (IIIPI, 2020, 2021a, 2023a).
Acute challenges are reported from specific areas, such as real estate, valuation, group insolvency and avoidance transactions. These issues are caused by poor coordination, judicial conflicts between RERA and IBC and a lack of integrity in value fixation. Lack of uniform standards for group insolvency and insufficient time frame to detect the nature of the transactions also complicate the process (IIIPI, 2021b, 2022, 2023b, 2024). Previous literature had significantly addressed the problems faced by IPs in a general tone, calling for changes mainly in the legal and structural areas. However, there is a lack of focused academic research exploring the common and ground-level challenges faced by the IPs that too from the perspective of IPs. Moreover, gaps remain in understanding the challenges in asset recovery. This study is unique as it is the first qualitative exploration into the challenges faced by IPs in corporate restructuring and asset recovery.
METHODOLOGY
Research Process
The study adopted a qualitative 2 approach employing semi-structured interviews without rigid pre-set frames (Kindsiko & Baruch, 2019; McMahon et al., 2012). The methodological strategy is appropriate for the study as it aims to assess the practical issues (Kaczynski et al., 2014; Lester et al., 2020) encountered by IPs. Semi-structured interviews are the best data collection method for exploring complex problems. Researchers could maintain some consistency in covering concepts based on literature or practice while allowing flexibility for the participants to share relevant insights (Strauss & Corbin, 2014, p. 59). The interview consisted of open-ended questions, allowing participants to speak about their experience without any constraints. This approach allowed us to gather many insights, some of which were highly novel.
Sample
Snowball sampling was used to collect data from IPs. Interviews were conducted with 20 IPs with over 20 years of restructuring experience in the pre-IBC era and who had managed over 15 corporate insolvency resolution process cases in the post-IBC regime. The demographic details of the participants are given in detail in Annexure 1. Results were highly reliable as the respondents were well-experienced in the relevant field. Interviews were conducted between October and December 2023. Permission was sought through e-mail to participate in the interview. Participants were contacted by phone, considering their convenience and to encourage informal communication. The purpose and aim of the interview were explained to them beforehand. Questions were circulated in advance to seek effective responses. Initially, two participants identified using the professional network of the authors were approached. Based on their responses, additional questions were added to gather deeper insights in subsequent interviews (Strauss & Corbin, 2014, p. 58). These initial participants served as ‘seeds’ for further recruitment, given their extensive connections within the field. The authors then directly contacted the potential interviewees as referred by the initial participants. Those who consented to the interview were then interviewed and added to the sample.
Participants were permitted to deviate from the question framework to generate new insights. All participants except one agreed to an audio recording. In the case of the participant who had not consented, the author attempted to take notes during the interview. Participants requested confidentiality as the profession demands, and the authors assured anonymity by not disclosing real names (Lofland et al., 2006). The identity and potentially identifying details were anonymized to ensure privacy and protect professional standing. Interview transcripts were coded without reference to specific cases, clients or other particulars that could lead to indirect identification. Furthermore, participants were informed of these confidentiality measures and assured that their responses would be reported in aggregate form, minimizing the risk of unintended disclosure. By implementing these precautions, the study maintained ethical integrity and respected participants’ privacy, thereby allowing them to speak freely about complex topics.
Interview Structure
Previous studies (Shekar & Guru, 2020) helped to form an overall idea about the common problems in the insolvency regime and some traces of challenges specifically to IPs (Mittapally & Jayaram, 2020) in the post-IBC regime. These insights helped the authors frame open-ended questions while maintaining consistency to seek effective responses. The interview started with a question about the pros and cons of being an insolvency professional. The insolvency professionals were then asked to describe the challenges encountered in corporate restructuring and asset recovery. The interview also consists of a general question enquiring more about the nature of the profession, whether stressful or manageable.
The interview was conducted using a semi-structured questionnaire given in Annexure 2. All participants enthusiastically engaged in the interview. The interviews lasted for 40–50 minutes.
Analysis
Interviews were transcribed verbatim to ensure the accuracy and depth of the responses. Once transcriptions were completed, they were reviewed for accuracy, and non-verbal markers were removed to focus on content directly relevant to the research questions. NVivo software is widely used in qualitative research to analyse smaller sample sizes. It yields richer qualitative data and allows in-depth analysis of individual responses (Altaf et al., 2025; Nizam & Rashidi, 2025). Thus, NVivo version 12 was used to identify themes. The transcripts were then imported into NVivo, organized and prepared for coding. An inductive coding approach was applied to allow themes to emerge organically from the data, without imposing pre-existing theories.
Using the constant comparative method (Strauss & Corbin, 1998, 2014, p. 111), each data segment was systematically compared with previously coded segments to ensure consistency and to refine emerging themes. The process began with open coding. Meaningful phrases and sentences were highlighted and assigned to nodes (codes) that captured key ideas. In NVivo, initial nodes were created to represent concepts as they appeared in the data. This open coding stage was guided by frequent comparison. Each new data segment was continuously examined against existing nodes, either expanding on current codes or creating new ones for unique insights. Codes were grouped and reorganized to reflect broader categories and themes as the coding progressed. NVivo’s hierarchical node structure was instrumental in building a clear organization of themes, allowing for parent nodes (broader categories) to encompass related sub-nodes (specific aspects of themes). A repetitive process was maintained to refine themes as more data were analysed throughout the analysis. The constant comparative method required each new data segment to be re-evaluated against existing themes, leading to the merging, splitting or redefinition of themes. Data saturation was achieved when no new themes emerged in the final set of coded transcripts, as confirmed by running queries and examining the thematic structure within NVivo. Thus, theoretical saturation was reached at this stage, confirming the adequacy of our sample as data began to reiterate across responses (Bryant & Charmaz, 2007; Sandelowski, 1995).
The NVivo software and the constant comparative method enabled a detailed, transparent analysis. This approach also led to the emergence of meaningful themes directly reflective of participants’ experiences. In this study, grounded theory was employed to draw inferences from the data, following an inductive approach in analysis, and was not intended for theory building (Strauss & Corbin, 1998, 2014, p. 77). Therefore, only the first two steps of the constant comparative method (Glaser, 1965) were followed to generate themes rather than theory development:
(1) Comparing incidents applicable to each category: Initial codes were generated—‘unreliable recordings’, ‘crossing timelines’, ‘difficulty in sourcing back data’, ‘value erosion’, ‘ambiguity in landowner rights’, ‘legal clarity’, etc.
(2) Integrating categories and their properties: In the second step, initial codes were organized into broader themes—‘Paucity and Asymmetry of Information’, ‘Structural obscurity’, ‘Deployment Miscues’, ‘Discord from Committee of Creditors and Other Stakeholders’, ‘Friction from the Corporate Debtor’ and ‘Generic Matters’.
Reliability Check
To enhance the reliability of the findings, a second researcher independently reviewed selected codes and coding consistency. The researcher recognized the author’s codes and created some new codes. This step ensured that the coding and categorization accurately represented the data. Any discrepancies in coding were discussed and resolved, further supporting the rigour of the analysis. Consistency in coding across the same interviews produced a reliability score of 85%.
FINDINGS: CHALLENGES
The following major themes emerged from the interviews with the IPs:
Paucity and Asymmetry of Information
The IBC empowers IPs to collect all information relating to the assets, finances and operations (IBC, s 18[a]) to ascertain the financial position of the CD. It also mandates the cooperation from the corporate debtor’s personnel, including promoters and managerial affiliates, with the IPs to effectively manage the CD’s affairs (IBC, s 19[1]). However, respondents admitted that there exists an absolute scarcity of information due to the reluctance of the core management team. The purposeful withholding of material information hinders IP’s ability to complete the cases. Registered valuers struggle to assess the company’s assets because the records are unreliable and incomplete.
A lack of proper maintenance of asset registers, especially stock and fixed asset registers, was also reported. Available documents do not match the organization’s real figures. Data with the supportive documents were missing. Delays in admission to the CIRP are becoming a principal reason for data loss because of the frequent changes in key personnel. IPs had witnessed the purposeful devastation of information:
All the possible sources of information are removed. The books of accounts were destroyed, computers and hard disks where accounts are maintained were taken away, and even the employees who manage the pivotal affairs of the organization were terminated. So, when all three ways in which it can be retrieved are taken back, how we can get the data? It will affect the preparation of the Information Memorandum and valuation of the assets which in turn halts the process. (R1)
Another respondent strongly stated that a proper system for recovering information from suspended management is lacking in India. The current legal system in India faces hurdles in facilitating information recovery:
The major reason why there is no information to deal with the case is that there is no proper system to force information from the CD. There should be some mechanism to do it so that there will be fear in the minds of the promoter or the suspended management to conceal it thinking about the consequences. (R20)
One of the respondents noted that when information is not readily available, it complicates the process, requiring IPs to approach various government departments. They are bound to approach the income tax department for information on financial figures. Moreover, the balance sheets provided may not be entirely reliable. This ultimately leads to crossing the permitted timelines:
Even in the hands of the Income Tax departments, there will be no completed balance sheets from which data can be fetched and thus we will run from office to office to gather it which even proves to be a failure at times when the authorities don’t cooperate. (R2)
IPs had experienced difficulty in sourcing back information from the banks. Since the bank accounts get closed, there is little scope for getting them with the full potential to use in the resolution or liquidation process:
Due to the Secrecy Act, bankers won’t budge, even with pressure from the IPs. Known accounts are a dead end, and unknown ones are a mystery. Organizations may have closed accounts and manipulated data before restructuring, making retrieval a nightmare. After closure, data is inaccessible after just 7 days. Such account numbers can’t be retrieved from the balance sheets, know! Savvy promoters can easily manipulate. So, getting information from account statements is a real challenge. (R16)
Specifically, in asset recovery, inadequate and inaccurate information creates challenges in asset tracing and recovery. This results in an incomplete and inefficient information memorandum, thus eroding asset value. Companies are reluctant to grant access to accounting records. This complicates the efforts to trace assets accurately and assess the organization’s true status. Thus, deliberate removal or destruction of the accounting books hampers the retrieval of clear and precise information. This leads to financial losses and unnecessary delays in asset valuation.
Letter of credit, bank guarantees, corporate guarantees—all veiled without a trace of non-financial transactions. Hidden possessions and documents obscure everything. Bank accounts might be under others’ names like key personnel or directors. Assets are locatable, but transactions are elusive. Forensic audits may recover some, but concealment or destruction of GST bills and invoices pose limitations. (R4)
Structural Obscurity
IPs admitted that the law is sound when asked about the regulatory perspective of IBC. However, they have expressed concerns about its implementation. Some IPs pinpoint the areas that demand more clarity.
IPs suggested that clarity is required for providing consideration to the priority of charges and value of security interest of secured creditors while distributing proceeds out of the resolution plan or sale of assets during the liquidation process (IBC, s 53):
A crucial look is needed to analyze the things mentioned in Section 53. It is essential to get much more clarity for the connotations articulated in Section 53 which talks about the distribution of the proceeds in resolution or liquidation to secured creditors. Clarity is needed in this realm concerned with the priority of charges and the value of security interest. (R6)
Rights of secured creditors in the resolution as well as in liquidation processes also call for clarification:
Law is sound and sober in most terms. However, implementation poses challenges. Yet another area that needs to be seriously dealt with is the clarity regarding the rights of the secured creditors. The rights of secured creditors having exclusive charge on secured assets need clarity and that should be made expeditiously. (R15)
IPs also demanded clarity on their duties when the court puts a stay on the order to commence CIRP:
One of the other challenges that I should mention is in connection with the duties of the IPs, when there occurs stay in the process. It is still a dark area that calls for regulatory clarification to clear off the clouds. (R18)
Another area that needs clarification is the rights of statutory authorities to recover tax dues or attach assets during resolution and liquidation, even without prior attachment or security interest. Additionally, the obligations of resolution applicants or liquidators to pay superannuation, gratuity and provident fund dues, especially when no funds are available, must be urgently addressed:
Rights of the statutory authorities in the resolution process as well as in the liquidation process about tax dues having powers to attach the assets of the corporate debtor even if there is no attachment to the assets or there is no agreement for creating security interest on the assets of the corporate debtor needs clarification. Another area can be the vague understanding of the payment obligation of the successful or the coming resolution applicant. Payment obligations for superannuation, gratuity, and provident funds by successful resolution applicants or liquidators need clarity, especially when funds are insufficient for genuine employee dues. (R17)
In real estate projects, issues regarding the rights of landowners were highlighted. The rights of landowners who have provided land to a real estate project, whether through a long lease or a joint development agreement, need clarification. Moreover, their status in the resolution or the liquidation process on account of pending lease premium, pending consideration for transfer of construction rights, pending handover of the constructed space as per the agreement, etc., also calls for clarification:
Landowners in real estate projects, whether on a long lease or through a joint development agreement, have rights in resolution or liquidation processes. Their status involves addressing pending issues like lease premiums, pending consideration for transfer of construction rights, and timely handover of constructed space … all these require clarification. Without this clarification, the real estate cases will not get resolved as land is the main subject matter of the resolution, and most of these agreements are terminated either before the commencement of CIRP or during CIRP. The rights of landowners need to be protected in real estate resolutions. (R16)
Respondents again pointed out that the rights of statutory authorities responsible for monitoring real estate projects, such as licensing authorities, city development authorities, green tribunals, town and country planning offices, and land and development offices, need to be protected to get cooperation from them to facilitate the commencement of construction in installed projects. This should be well established with precision, and the dues are to be treated with priority.
IPs also reported that clarity issues are found in the orders pronounced by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). In many cases, there are differences in the verdicts or the orders pronounced by the NCLT and NCLAT:
There are noticeable differences in statements given by NCLAT and NCLT, leading to a lack of clarity and uniformity in judicial pronouncements. In my three cases where I was the IP, while two cases ended in bankruptcy, the third faced reconsideration due to unclear Cash Credit limits. Notably, an informal remark from an NCLAT judge triggered this, despite no formal order being pronounced. This illustrates ongoing challenges stemming from differing interpretations of similar matters in such cases. (R4)
IPs also noted the shortage of nodal officers in government departments who are knowledgeable in IBC and can stay in touch with the Insolvency and Bankruptcy Board of India when such needs arise. These officers can reduce the errors and undue delays in executing each step of the CIRP:
There exists a lack of nodal officers equipped with competence and knowledge about IBC and CIRP who can be appointed in all semi-governmental and governmental departments who can work in tandem with IPs, government agencies, and IBBI when such cases occur like the DGM in state bank who have direct access to deal with IBBI. I strongly believe that it’s a big miss-out that degrades the implementation value of the IBC. (R16)
Another issue was that digital portals provided information about CIRP discharges in a limited manner. There is no steady and proper dissemination of information about the decisions and judgements from various benches and sections in the NCLT:
We fetch information from the online portals where the information on the initiation of the CIRP admission and its various stages. However, I think it is sparse in the sense that there needs to be more detailed and separate information on the judgments resulting from each bench or the sections in the NCLAT or the NCLT. More clarity is crucial for administrative convenience and efficient decisions. (R8)
In asset recovery, ineffective litigation measures were identified. Indian law is silent in this realm:
Indian Law is not so effective in this realm. Litigation provisions need to be improved to reconcile the impediments… Thus, a drastic framework should be implemented expeditiously. (R9)
Deployment Miscues
Implementation issues persist in IBC when executing corporate restructuring and asset recovery. The first and foremost challenge found is the lack of timely decision-making. As this problem exists, the viability of the comeback decreases, and the valuation too goes down:
In critical situations, timely decision-making is paramount, yet this is often lacking in the Indian context. Delays in decision-making, compounded by sluggish information retrieval and cooperation from government authorities, exacerbate the problem. By the time consensus is reached, the value of assets may have significantly depreciated, rendering retrieval futile. The longer the delay, the lower the asset valuation, and the greater the likelihood of liquidation. This contradicts the fundamental principle that timely resolution preserves asset value and company viability. Unfortunately, our courts often disregard the importance of time, claiming non-binding timelines. Consequently, many companies face liquidation due to the judiciary’s failure to recognize the time value of money. Ultimately, the preservation of resolution hinges on timely action, as value diminishes with each passing moment. (R1)
Another major challenge was the scarcity of knowledgeable judges with a background in commercial or insolvency law. This insufficiency is becoming a major threat, as those who pronounce the verdicts have little knowledge of the realm. Thus, the respondents urge to enhance judges’ selection criteria by adding these specifications:
I think the problem lies mainly in the implementation of the law and we need good judges, better-trained judges who understand business. By the time they get some sense of IBC, they are removed. Most of these judges who are coming are from a background that is not commercial. Ultimately, both the Companies Act and IBC are commercial laws. These are handled by NCLT. But, nowhere in the selection of the judges, it is a criterion that they should have some background in the Companies Act or insolvency. So that is a big challenge that they take time to understand the law. And by the time they understand the law, it’s time to go. New people come in and take charge. That means the law is now becoming an experiment. So, this needs to be dealt with seriously. (R20)
Integrity problems also exist in the valuation profession. Professional valuers fall short of behaving like professionals, not showing diligence, integrity, honesty or expertise in the process:
Although the valuers are regulated, that kind of expertise and kind of diligence, honesty, integrity, etc., is not exhibited by them. (R9)
Another issue was that the assets did not become part of the liquidation estate. This relates to the leasehold lands under the Companies Act (CA), 2013. IPs state that no market exists for the buildings or assets that form part of this leasehold land (CA, s 230):
In a Kerala case involving a hospital, in which I was involved, the outstanding loan exceeded 50 crores, turning it into a non-performing asset. Despite initiating the CIRP process, no buyers came forward due to a crucial issue: the hospital was built on leasehold land, which wasn’t considered part of the asset due to a lack of consent from the leaseholder. Although the building and machinery were part of the asset, the land wasn’t. As litigation ensued, the liquidation process began. The bank applied to the high court for specific performance, willing to settle as the land wasn’t part of the liquidation estate. Despite efforts, a proposed settlement of 25 crores didn’t materialize during discussions with the overseeing general manager. (R15)
IPs also face difficulties due to loose agreements and contracts. This can destroy the true soul of the process due to ambiguity in dealings:
In one case, in the auction, the liquidator sold the assets to the buyer with the agreement that first he had to pay a certain amount and the balance outstanding at a later stage. But what the buyer did was that he paid the entire sum. But later on, the liquidator came and asked the buyer for the balance amount that was supposed to be recovered from him. So, this is another complexity where clarity is lacking. So, in the Letter of Intent, it should have been mentioned. You cannot go and ask for money again from the one who had paid the entire sum. That means many agreements are entered into without certainty and clarity. (R15)
IPs are entrusted to conduct CoC meetings (IBC, s 24). Additionally, Corporate Insolvency Resolution Process Regulations mandate a minimum quorum for these meetings and specify that voting cannot proceed if even a single CoC member is absent, necessitating arrangements for electronic voting (IBC, 22, 21[3][b], 25[5]). Despite these provisions, the voting process during CIRP is slow and time-consuming, particularly regarding resolution plan approval or rejection.
Timeliness Breach further complicates the process in IBC. IPs are experiencing tiring situations, especially when the plan is not getting approved by CoCs. It makes them run from pillar to post, meeting with banking officials to get them to buy the assets. The top officials are also blamed for creating unnecessary delays:
In one of my cases, under Section 9 i.e. the OCs, the cut-off limit was fixed at 20 crores to be taken care of by the Asset Recovery Branch and beyond that by Stressed Asset Management Banks. The CIRP process began with files in the Asset recovery branch, but the first meeting of the CoC failed to reach a consensus, resulting in a delay of over 1.5 months. This delay caused the transfer of matters to the stressed Asset Management branch, causing a loss of 90 days. Stressed Asset Management Bank lacked the authority to decide. I had to meet senior officials up to the CGM level to push for buying consent. They insisted on action only when the file reached their table. No one took responsibility. IP here faced the trouble and was left to run around. (R15)
Another concern raised was the expenses borne by IPs. They might have borne it out of their pockets without seeking approval when emergencies arise. CoCs will not bear these expenses and have to chase reimbursement. This discourages the IP’s enthusiasm to carry out the cases further:
In some cases, IPs encounter urgent expenses that cannot wait for CoC approval. These expenses are often crucial and cannot afford delays. However, there’s no provision for the CoC to reimburse or approve these expenses retroactively, leading to potential financial burdens on the IP. This creates a significant challenge in managing emergencies during insolvency proceedings. (R17)
Another issue that can be spotted is that companies do not have proper registration with the Registrar of Companies (MCA). Thus, record filing is incomplete and missing, as no financial audits are properly done. This creates difficulties in ascertaining who is the debtor and who is the creditor:
Furthermore, some CDs have no filings with the Ministry of Corporate Affairs or the Registrar of Companies beyond a certain point. Say, if an order is passed in 2023, the records may be up to 2017 or 2018. Thus, the lack of recent financial audits or statutory reports presents a deficiency, making it difficult to ascertain the list of creditors and debtors. Without an updated list of debtors, it becomes challenging to determine from where I can recover the owed amounts. (R4)
Contributing to these obstacles, it was stated that when a company becomes dysfunctional, there will be no financial creditors (FCs) or operational creditors (OCs) to take charge of it. Thus, the IPs will be in a dilemma about paying the fees. It pushes them to move an interlocutory application before the NCLT to recover the cost. This again prolongs recovery:
In some cases, companies become non-functional, posing a challenge in insolvency proceedings. For example, in one case where CIRP was initiated under Section 7, despite public announcements and invitations for claims, no financial or OCs submitted claims. This situation left the IPs with uncertainty regarding the next steps and who would cover their fees. In such instances, the IPs may need to file additional motions to recover expenses, leading to further delays, as seen in a case where it took one and a half years to recover fees. (R8)
Moreover, the NCLT takes longer to admit matters. In many cases, it is evident they do not have the requisite trends to take up the cases. This situation can also aggravate the breach of timelines:
The 330-day timeline is often surpassed due to delays in admission, IP appointments, CoC approvals, and NCLT’ delay to admit matters. Many IPs encounter this issue due to inadequate resources in NCLT benches. Regulatory complexities exacerbate the situation. For example, a Section 9 application filed in 2020 received an order in 2023, indicating significant delays. While some improvements have been made, such as faster application approvals within 15-20 days, the overall process duration needs improvement. (R10)
In asset recovery, there are no assets in most cases. Lost parts, bogus entries, unreal stocks and debtors crowd the book of accounts. Some were found using forensic audits, but many were hidden without proof:
In many cases, there are no assets left, as valuable assets like machinery and working capital have been lost. Access to books of accounts is often denied, leading to an information gap, with registers potentially containing bogus entries. Promoters may deliberately create incomplete balance sheets to minimize data, exacerbating the challenge of assessing the financial situation. (R6)
IPs also struggle to take possession of the assets, even leading to police cases. They also find it difficult to identify the preferential, undervalued, fraudulent, and extortionate transactions (PUFE) and deal with the associated matters within the stipulated time:
For the PUFE transactions, we are allowed the timelines of 105 days, 115 days, and 135 days to identify, and conduct transaction audits or forensic audits, etc. But in my opinion, it is not easy to detect and do those things within this stipulated timeline as we have to work rigorously to find it. (R15)
Moreover, unnecessary litigation, stays and multiple rounds of auctions reduce the value of the assets and make the sale process difficult.
Discord from the Committee of Creditors and Other Stakeholders
The harmony between the IPs and the CoCs should be very cordial, as they are primarily responsible for maximizing the value of the CD. They strive to balance the interests of all the stakeholders in the process. The CoC’s commercial wisdom is a significant factor and is responsible for acting in the best interest of the stakeholders. However, IPs face acute resistance from the stakeholders, especially the CoCs. Respondents experienced major conflicts in the distribution pattern, filing litigations and delaying the process:
Unnecessary litigations that are being filed by the CoC demanding lame things are becoming a big problem. It occurs mainly in the case of distribution patterns in the process of liquidation or resolution. (R11)
Another principal cause is the differential treatment of secured and unsecured FCs in the distribution of proceeds. A lion’s share goes to the secured financial creditors. However, unsecured FCs are left with a very meagre amount to share between themselves.
There are also traces of CoC reluctance contributing to the CIRP cost, leading to unwarranted delays in resolution and closure of operations, and ultimately depleting value. Even the operational costs of keeping the organization going are not funded. CoC’s reluctance to accept the haircuts in their outstanding dues from the CD’s assets is becoming a major issue:
CoC is not always cooperative with the process. A kind of hesitance to accept the haircuts is always there which happens due to the ignorance on the part of the members about the true intention of the process. The operational cost that is so indispensable for the process is not provided by them to bring at least hope and solace to the organization and its related parties. This is critical as the ailing companies are not given ventilators when standing in between life and death. (R12)
The CoC members are blamed for placing greater emphasis on their priorities than on the firm’s viability. Extreme situations are reported where IPs undergo pressure, numerous interlocutory applications (IAs), and litigations filed against them to maintain the hold:
Stakeholders have diverse priorities. Stressed asset management companies aim to profit from purchasing assets cheaply. Banks, both public and private, prioritize meeting annual recovery targets over rescuing organizations. Their focus is on maximizing recovery rates rather than rescuing the firm, often resorting to tactics like initiating IAs, litigations, filing complaints against IPs, and even police cases to create delays. (R14)
There are also instances where CoCs attempted to discourage resolution applicants from filing better plans:
First of all, they will burn the information and create unnecessary rumours in the market stating this is a problem, that is a big problem, and will discourage the people who are interested in putting money. (R13)
Total ignorance and a lack of knowledge about the process in this realm also create problems. Junior banking officials attend the CoC meetings, while senior officials usually skip them. Thus, the decision is delayed due to the unfamiliarity with the law and its practicality:
Circulars emphasize the need for members to attend meetings fully prepared with commercial wisdom, but this isn’t always the case. Instead, lame assurances are given by juniors that issues will be discussed with senior officials and addressed within a few days. However, these assurances often result in delays in decision-making, hindering timely measures essential for rescuing the organization. (R2)
OCs, the disadvantaged class, suffer differential treatment in distributing the proceeds and voting rights. This leads to OCs not being ready to pursue the cases after admission, as huge costs are involved. Additionally, they lack awareness that the resolution process initiated by the law can only be terminated by law, which creates challenges for IPs who often end up covering expenses out of pocket. This again creates IAs, involving contempt of court orders and police cases filed by IPs against OCs.
Decision-making with multiple FCs is another challenge. It is described below in its true essence:
Where the CoC is constituted of multiple FCs, their decision-making takes a beating, as, the CoC members have to consult the higher-ups, reason, the CoC members attending the meetings have no authority or limited authority to decide on the spot. This delays the decision-making process. Moreover, bringing a unanimous decision among the bankers and the CoCs is a herculean task as they solely stick to their motive of maximum recovery with no proper knowledge of the true soul of the law. (R15)
Lastly, disagreements between the CoCs and the IPs in the valuation price set by the IPs also create issues:
Sometimes the CoC says that for instance below 100 crores, we will not agree. That means at times CoC will not agree to the valuation set by the IP. So, this is a bone of contention that lies between the IPs. But it will get resolved automatically sometimes but not always. (R12)
In asset recovery, resistance from the CoCs against taking possession of assets, both physically and financially, hindered the process.
In one of my cases, two banks were involved, and the assets were supposed to be handed over to the IP appointed for necessary actions like sell-offs. However, one bank received orders from government authorities to retain possession of the assets, causing the process to collapse. Instances abound where the CoC and financial creditors failed to cooperate with the IP, adopting an attitude of handing over the responsibility entirely without involvement, hindering smooth recovery efforts. (R8)
Friction from the Corporate Debtor
Friction exists mainly in information provision, resistance to takeovers and frustrations arising from the inability to submit resolution plans. IPs have reported non-cooperation from the debtor or the suspended management. Access to the book of accounts is denied. A major factor is the fear of audits, especially when consultants advise against sharing information, leading to serious consequences (IBC, ss 43, 45, 49, 66). CDs even skip meetings, not to share information:
The concealment or the denial of the information concerning the books of accounts is crippling the whole process. The facts need to be hidden so they will never be audited by the authorities like conducting forensic audits or financial audits based on the advice from other consultants that it is better to face the consequences under Sections 43, 45, 49, or 66 of IBC. (R3)
In India, owners and management are often the same people. As a result, directors of CDs commonly resist losing control of the firm, which creates friction with the IPs.
Another major issue is the eligibility to submit a resolution plan (IBC, s 29A). This section antagonized the promoter to the resolution process. Most of the challenges arise in this area, where the promoter stalls the jobs of the IPs through legal tactics, physical interferences, removal of people and employees, etc.
Promoters often engage in litigation even before admission to prolong the process and maintain control by removing assets or causing mischief to delay proceedings significantly. Section 29A prevents promoters from returning, thereby fuelling much of the litigation around the CIRP. Delays in admission primarily stem from promoters’ pre-admission litigation tactics, as they exploit the time before admission to retain control and hinder proceedings, extending the process for years. (R17)
Miserable cases of denying permission to enter the premises and not entertaining communication with the IPs by CDs were also reported.
Generic Matters
The area that calls for quick reconsideration is regarding the powers of the NCLT. Even after years of introducing IBC, there is less power in the hands of the NCLT to seek and recover information from the organizations. Thus, the legal system in India lacks effectiveness in gathering information for the CIRP process:
It is an admitted fact that the legal system is not at all efficient in seeking information from the suspended management. More power is necessary to create fear about the consequences of not providing information. (R13)
Another problem is the shortage of cases compared to the number of IPs in the industry. Thus, acute competition also becomes a hurdle. There were also demands for sanctions for more IPEs than IP individuals to support the cases more efficiently with better resources and a robust structure.
There is a notable gap in bench capacity at the NCLT, which delays decisions and resolutions. Moreover, hearings before the special benches resulted in lower efficiency than those before the regular benches.
Another important aspect that requires attention is interim finance. The market for interim finance is underdeveloped, and availability is even scarcer. CoCs indulge, making the situation worse, even if interim finance is treated with super-priority, and will be paid by the new management team. Thus, IPs find it difficult to move on:
Obtaining interim finance for Going Concern’s operations is crucial for various needs such as purchasing stock, paying employee salaries, and ensuring working capital. However, proposing refinancing to bankers or financial creditors becomes challenging as they are often reluctant to invest more money in resolving bad debt, questioning why we should put more money after bad money. IPs face the task of convincing them by highlighting the potential super-priority repayment, but despite efforts, financial creditors frequently resist putting in additional funds for this purpose. (R7)
Other drawbacks include a lack of well-trained human resources, outdated technology and infrastructural deficiencies within the adjudicating authorities. Multiple reporting, overlapping compliance requirements and duplication of records also hinder the smooth conduct of the process.
Some startling facts were revealed, making it an eye-opener. It was about the knowledge of other agencies about CIRP and the related processes:
Two years ago, an IP managed a project in Uttar Pradesh remotely from Mumbai. He oversaw operations, compliance, and everything related to the project. Before the insolvency process began, a non-compliance issue arose. Unfortunately, an accident occurred, leading to a fatality. The Uttar Pradesh Police, unaware of the IP’s court-appointed role, arrested him in Mumbai. This highlights a common lack of understanding among local enforcement authorities regarding the functions of resolution professionals. (R5)
Another one says:
Reputation risks are high for IPs. Enforcement agencies often don’t recognize us, leading to wrongful arrests. Court warrants are issued erroneously, requiring high court orders for correction. MDs shift blame to IPs for management decisions, like issuing cheques. Many courts and government officials are unaware of CIRP and IPs’ roles, leading to misunderstandings. Reputational risks include targeting, arrests, blackmail, and clashes between employees over responsibilities. Personal cases and many complaints against IPs go to IBBI. There are situations where we can’t take the phone calls and even complaints go for that. Even I switch positions often, with CIRP alone, we can’t survive. (R16)
Other complexities include structural complications of CIRP filing, the need for separate benches to deal with the IBC and CA cases, etc. These challenges affect the efficiency of the CIRP process and impair IP abilities.
There were also instances of inherent reluctance from management, as the financiers, to take up restructuring if it is not a big-ticket item.
The reluctance of the financiers is really sad and to attract them, the NPAs need to be classified and codified under the substandard assets category. But the process of classification is not that easy. (R14)
In asset recovery, the major impediment is that there are not enough funds for the recovery, and IPs have to pay out of their pockets. Local resistance in the case of smaller accounts and media indulgence also makes the process more difficult:
We’re not financial institutions or banks, so we can’t cover the expenses for recovery. Often, it comes out of our own pockets. The remuneration we receive doesn’t fully cover our costs; we must manage office expenses, employee salaries, and advertising. If the money doesn’t come through, and we invest in just a couple of cases, it could jeopardize our operations. Media tends to highlight negatives, particularly in cases involving smaller accounts, adding to the challenges we face. (R8)
CONCLUSION
The study indicated that IPs faced difficulties in corporate restructuring and asset recovery processes. Inadequacy and inaccessibility of information, differences and deficiencies in regulations, non-cooperation from the CDs and CoCs and ignorance about the IP profession emerged as the major challenges. Other challenges, such as integrity issues, improper filings, unnecessary litigation, lack of interim finance and OCs’ plight, aggravate the situation. Inadequate manpower, insufficient trends in adjudicating authorities, technological deficiencies and delays in obtaining timely approvals from relevant authorities further complicate the process.
The study is adorned with valuable recommendations from IPs, based on their individual experiences, that policymakers can adopt to make the process more coherent. The first and foremost suggestion put forward by the IPs was the need for a proper system to recover information from the suspended management. Indeed, IBC is rich in provisions to deal with non-cooperation by CDs or any of their officers. Insolvency professionals have the right to make an application to the adjudicating authority to issue necessary directions to the defaulting personnel of the ex-management if they fail to cooperate with the process (IBC, s 19[2][3]). Moreover, any officer of the CD will be penalized with imprisonment for three to five years or a fine ranging from ₹1 lakh to ₹1 crore for misconduct on the grounds of failing to disclose property details, not delivering assets or records to the RPs, concealing knowledge of false debts, obstructing the production of relevant documents or falsifying accounts, etc. (IBC, s 70[1]). Non-cooperation or intentional withholding of information and submission of false or misleading information are punishable under various sections in IBC (IBC, ss 68, 71, 72, 74, 76, 77). Still, IPs find it difficult to obtain sufficient information for the smooth and efficient conduct of cases. Thus, the power of the NCLT, the adjudicating authority, needs to be strengthened so that promoters and suspended management have some fear of the consequences of failing to provide information. The legal system should be made efficient in information recovery and enforcement. Second, expeditious approvals by financial authorities, government departments or top officials for restructuring and recovery matters should be ensured to reduce value depletion, information destruction and even loss. A time period should be stipulated to reduce red tape in this regard and streamline the process meticulously. This will lower the breach of timelines, an inherent issue in the process. Third, the criteria for selecting judges ought to be strengthened. The CA 2013 clearly states the criteria for selecting NCLT members in both the judicial and technical realms. Judicial members should possess substantial experience in law or judicial capacity (CA, s 409[2]), and the technical members should have corporate expertise of at least 15 years in finance, industrial management, business administration, accountancy, etc. (CA, 2013, s 409[3]). Even though IBC was established in 2016, a blend of legal and commercial expertise can further enhance the tribunal’s effectiveness in handling complex corporate matters. Those judges who are well-versed in insolvency law and have a strong grounding in business operations and commercial realities can address the cases more efficiently. Thus, a sharper focus on insolvency or restructuring experience, without compromising legal expertise, is essential to improve the efficiency of the NCLT. So, to improve the current situation of experimenting with the law, well-trained and competent judges should be deployed. Capacity-building programmes and training sessions for tribunal members on operational and legal aspects (Dixit, 2024; Yadav, 2023) can lead to informed, swift and coherent judgements, fostering greater legal certainty with commercial insights. Fourth, a code of conduct for registered valuers is necessary to transform them into professionals with integrity and honesty. This will reduce their tendency to act in line with the pressures and demands exerted by the IPs in valuation, with expertise in action. Fifth, the NCLT must be strengthened with adequate manpower, additional benches and greater judicial consistency to ensure timely admission of matters and reduce delays and value erosion. Structured formats for NCLT and NCLAT orders should be introduced to bring clarity and uniformity, thereby minimizing litigation arising from shifting interpretations. Enhancing digital portals—with clearly segregated, regularly updated decisions from different benches—is also essential to improving transparency. Enabling morning and evening pronouncements could also significantly accelerate resolution and recovery processes. Sixth, clarification regarding the rights and obligations of the parties involved in every situation should be ensured. Clarity is needed in prioritizing charges and valuing secured creditors’ interests in distributing proceeds during a resolution plan or asset liquidation (IBC, s 53). Secured creditors’ exclusive rights require clarification in both resolution and liquidation. The duties of RPs during a court-stayed CIRP commencement order need definition. The statutory authorities’ rights in resolution and liquidation, particularly regarding tax dues and attachment of assets, require clarification. Successful resolution applicants or liquidators must have defined obligations for superannuation, gratuity, and provident fund payments when funds are insufficient for workmen and employees. Landowners’ rights in real estate resolutions, including pending lease premiums and construction rights, require protection. Statutory authorities overseeing real estate projects, such as licensing and development offices, need safeguarding, with priority consideration for their dues to facilitate project commencement. Seventh, nodal officers from all government and semi-government agencies should be appointed to work with the NCLT to ease the process, as they will have pre-approval to make decisions. The designated positions can run the process smoothly. Eighth, sanctions to more IPEs, well-trained human resources, technology advancements, etc., should be materialized to lower the IP and case plights. Ninth, an organized legal framework for asset recovery should be formulated and implemented soon in the Indian legal regime to better trace assets, which is currently absent. Tenth, and most importantly, a code of conduct, meeting procedures, and formalities should be introduced soon to regulate CoCs and avoid the made-up complications that can halt the entire process and leave the IPs helpless. Moreover, they should be trained by IBBI personnel through awareness programmes to spread awareness of IBC, corporate restructuring and related matters. Lastly, but notably, IPs should have a forum to seek support rather than only penalizing them for their mistakes. A platform with orchestrated procedures to address their issues should be established at the central level to give solace and patronage to IPs. Thus, it is evident that the study was exploratory and evolved into a pragmatic approach, driven by the richness of the solutions.
In conclusion, the article unveiled the intricate landscape of the challenges faced by IPs in corporate restructuring and asset recovery. It also offers a comprehensive thematic analysis that underscores the urgency for adaptive strategies and collaborative efforts to mitigate the complexities inherent in this crucial domain of financial management. With constructive efforts at the structural and implementation levels, corporate restructuring and asset recovery can achieve resolution and maximization, thereby realizing the virtuous intentions of the theory of creative destruction.
Footnotes
DECLARATION OF CONFLICTING INTERESTS
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
FUNDING
The authors received no financial support for the research, authorship and/or publication of this article.
NOTES
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Annexure 1. Demographic Data of Participants.
Annexure 2. Questionnaire.
Open-ended Questions: