Implementation Delays of the Resolution Plan under IBC: Rising Anxiety
The Insolvency and Bankruptcy Code (IBC), 2016, aims to keep corporate debtors' businesses afloat through the Insolvency Resolution Process. However, recent judicial rulings have highlighted concerns about the risk to investors who participate in the resolution process and the potential for their executed plans to be invalidated on technical or other grounds.
In a notable case, the Supreme Court ordered the return of payments made by the SRA and directed liquidation in the matter of Kalyani Transco v. Bhushan Power & Steel Ltd., citing procedural infirmities, non-compliance with IBC provisions, and delays in implementing the resolution plan. This judgement has far-reaching implications for resolution applicants, as it underscores the importance of careful risk assessment during the resolution process.
The Supreme Court has also made a prima facie observation that the judgement in Bhushan Power and Steel Ltd. requires a review in the matter of Punjab National Bank v. Kalyani Transco & Ors., R.P.(C) No. 1432 - / 2025. If the review is granted, it could potentially set a precedent for future cases.
The current timeline for challenging the implementation of Resolution Plans approved by the National Company Law Tribunal (NCLT) under the IBC is generally within 30 days from the initiation of the challenge process. However, this timeline has been a subject of judicial inconsistency and delays, prompting recent reforms under the Insolvency and Bankruptcy Code (Amendment) Bill, 2025.
Traditionally, any challenge to the implementation of a resolution plan had to be filed within 30 days of the plan’s approval or application by the resolution applicant, consistent with provisions under the IBC to ensure expeditious resolution of insolvency cases. However, delays and inconsistent judicial rulings, such as conflicting priority orders among creditors, have resulted in protracted litigation, undermining the Code’s goal of timely resolution.
The 2025 Amendment Bill introduces reforms aiming to shorten timelines at various stages, including the admission of insolvency applications (mandated within 14 days) and segmenting the approval of resolution plans into two parts—implementation first, and distribution later (within 30 days)—to prioritize speed and reduce inter-creditor disputes. The Amendment Bill also introduces a creditor-initiated insolvency resolution process (CIIRP), designed to facilitate quicker out-of-court resolutions, potentially reducing delays caused by prolonged tribunal interventions.
Judicial inconsistencies around delays have primarily stemmed from NCLT backlogs and varied interpretations of procedural rules, causing many cases to exceed the originally prescribed 330-day resolution limit, leading to calls for clearer statutory timelines and procedural reforms.
In another significant case, the Supreme Court invalidated the implementation of JSW's resolution plan for Bhushan Power and Steel Limited, citing procedural infirmities, non-compliance with mandatory provisions of the IBC, delay in filing application, and delay in implementation of the Resolution Plan. This judgement suggests that a rigid jurisprudence of retrospective invalidation or forfeiture on non-compliance without any legislation in place would result in disproportionate harm to the parties in both the transactions.
The Supreme Court has expressed concern about setting aside a successfully implemented resolution plan and directing liquidation, especially when the company has been revived in five years. The absence of a coherent stance on judicial decisions surrounding delays in the implementation of resolution plans undermines the fundamental object of the Code.
The authors of this article are Dinesh Babu Eedi, a Partner, and Guru Charan, an Associate at Lakshmikumaran & Sridharan attorneys.
In conclusion, while the IBC aims to provide a swift and efficient resolution process for corporate debtors, the lack of clarity in timelines and judicial inconsistencies have led to delays and disputes. The 2025 Amendment Bill seeks to address these issues by introducing stricter timelines and procedural reforms to expedite the insolvency resolution process. However, it remains to be seen how these changes will impact future cases and the overall effectiveness of the IBC.
The 2025 Amendment Bill presents an opportunity for the insolvency and bankruptcy process to become more efficient, as it aims to shorten timelines at various stages, including the admission of insolvency applications and segmenting the approval of resolution plans into two parts, prioritizing speed and reducing inter-creditor disputes.
Despite recent judicial rulings that have highlighted concerns about the risk to investors in the resolution process, the Supreme Court's observations and decisions have demonstrated the importance of careful risk assessment in finance and business, especially in the resolution process under the Insolvency and Bankruptcy Code (IBC).
