Opposition parties on 1 April criticised the government in the Rajya Sabha over proposed amendments to the Insolvency and Bankruptcy Code (IBC), raising concerns over large “haircuts” for creditors, delays in resolution and infrastructure constraints at tribunals.

The House was debating the Insolvency and Bankruptcy Code (Amendment) Bill, 2026, which proposes 12 changes to the law introduced in 2016.

Concerns over haircuts and recoveries

Sukhendu Sekhar Ray said frequent amendments to the law have not addressed core issues.

He said that as of September 2025, around 8,659 cases were admitted by the National Company Law Tribunal (NCLT), of which only 3,865 were resolved.

Ray said creditors have faced average haircuts of 67–70 per cent, with recovery rates falling to 30–33 per cent of admitted claims.

“In some cases, it reached as high as 81–83 per cent,” he said, adding that public sector banks may have foregone nearly Rs 8 lakh crore since the inception of the IBC.

He alleged that the insolvency process is being used to undervalue assets, enabling their acquisition by related parties.

Members also flagged delays and capacity constraints at the NCLT.

Lok Sabha refers corporate laws amendment bill to parliamentary panel

Rajathi cited data from the Economic Survey indicating over 30,000 pending cases before the tribunal as of March 2025.

She said such delays undermine the IBC’s mandated 330-day timeline for resolution and pointed to vacancies and infrastructure gaps.

Other members said the system faces bottlenecks that make timely resolution difficult.

MSME concerns and legislative powers

Rajathi also raised concerns about the limited uptake of the pre-packaged insolvency resolution process for MSMEs, noting that only a small number of cases have been admitted since its introduction in 2021.

She further said provisions in the amendment allowing the government to frame rules on cross-border insolvency could dilute Parliament’s legislative role.

Sanjay Singh alleged that the law benefits large corporate defaulters at the cost of public money.

He said the system effectively allows large borrowers to default while losses are borne by banks and depositors.

Government side and other views

Ayodhya Rama Reddy acknowledged the achievements of the IBC but said infrastructure gaps and delays need to be addressed.

Members from BJD, RJD and other parties also raised concerns over removal of fast-track processes and the impact on smaller entities.

BJP member Madan Rathore highlighted improvements brought about by the IBC in resolving stressed assets.

The debate on the bill is expected to continue in the House.

Cabinet approves controversial insurance Bill allowing 100 pc FDI