HARMONIZING SOLUTIONS: IBBI EXPERT COMMITTEE ADVOCATES VOLUNTARY MEDIATION IN IBC

By JATIN SHARMA ADVOCATE

HARMONIZING SOLUTIONS IBBI EXPERT COMMITTEE ADVOCATES VOLUNTARY MEDIATION IN IBC In a significant development aimed at bolstering the effectiveness of the Insolvency and Bankruptcy Code (IBC), an expert panel convened by the Insolvency and Bankruptcy Board of India (IBBI) has proposed the introduction of voluntary mediation as a complementary mechanism for dispute resolution. This recommendation marks a pivotal step towards streamlining insolvency proceedings and fostering consensual resolutions in the Indian corporate landscape.

The expert panel’s recommendation emphasizes the recognition of mediation as a valuable tool for addressing complex and multifaceted disputes and promoting stakeholder consensus in insolvency and bankruptcy cases. By offering parties a voluntary and eased process for conciliation and settlement, voluntary mediation aligns with the overarching objectives of the IBC to maximize value for creditors, preserve the going concern of businesses, and expedite the resolution process.

DO YOU KNOW, WHAT IS IBC AND HOW COMPLEX THE LITIGATIONS UNDER IBC, LET’S KNOW FROM THE LEADING EXPERT

Mr. Jatin Sharma, Advocate and Founder of Jurist & Jurist International Law Firm
( www.juristandjurist.com ), explained about IBC. He stated that the IBC, or the Insolvency and Bankruptcy Code, is a comprehensive legislation enacted in India in 2016 to consolidate and amend the laws relating to insolvency resolution for individuals and corporate entities. Its primary objective is to address the issue of non-performing assets (NPAs) and provide a time-bound process for resolving insolvency, thereby promoting ease of doing business and fostering a robust credit environment. The criticalness of litigations under the IBC cannot be overstated, given its significance in the Indian economy and its impact on various stakeholders.

Here are some key points highlighting the critical nature of litigations under the IBC:

Economic Impact: The effective resolution of insolvency cases under the IBC is crucial for maintaining financial stability and promoting investor confidence in the economy. Timely resolution of distressed assets helps unlock value, preserve jobs, and facilitate the efficient allocation of resources.

Creditor’s Rights: The IBC aims to balance the interests of creditors and debtors by providing a transparent and predictable framework for debt resolution. Litigations under the IBC often involve disputes over creditor rights, priority of claims, and the distribution of assets, making them critical for safeguarding the interests of stakeholders.

Stakeholder’s Accountability: The IBC imposes accountability on debtors, creditors, resolution professionals, and other stakeholders involved in the insolvency resolution process. Litigations play a crucial role in holding parties accountable for their actions, ensuring compliance with statutory obligations, and promoting transparency and fairness in proceedings.

Legal Precedents: Litigations under the IBC contribute to the development of legal precedents and jurisprudence, shaping the interpretation and application of insolvency laws in India. Landmark judgments and rulings by the National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal (NCLAT), and Supreme Court set important precedents that guide future insolvency proceedings.

Resolution Efficiency: Delays and complexities in insolvency litigations can undermine the efficiency of the resolution process and impede the timely recovery of distressed assets. Streamlining litigation procedures, enhancing judicial capacity, and promoting alternative dispute resolution mechanisms are essential for improving the efficiency of insolvency resolution under the IBC.

HOW DO YOU TAKE UP THE ROLE OF MEDIATION BY EXPERT COMMITTEE IN IBC

Mr. Jatin Sharma added “Well, the role of mediation by an expert committee in the Insolvency and Bankruptcy Code (IBC) is multifaceted and significant, contributing to the efficient resolution of insolvency cases and promoting stakeholder consensus”. I think the following key aspects can emphasize the role of mediation:

Facilitating Consensual Resolution: Mediation by an expert committee provides a forum for creditors, debtors, and other stakeholders to engage in constructive dialogue and negotiate mutually acceptable solutions to resolve insolvency issues. By facilitating consensual resolution, mediation aims to minimize disputes, reduce litigation costs, and expedite the resolution process.

Addressing Complex Disputes: Insolvency cases often involve complex financial and legal issues, leading to protracted litigation and delays in resolution. Mediation by an expert committee offers a structured and facilitated process for parties to address these disputes comprehensively and efficiently, leveraging the expertise of qualified mediators to navigate intricate matters.

Promoting Timely Resolution: The time-bound nature of insolvency proceedings under the IBC necessitates expeditious resolution to maximize value for stakeholders and preserve the going concern of the debtor’s business. Mediation by an expert committee enhances the efficiency of the resolution process by providing a mechanism for timely settlement of disputes, thereby preventing unnecessary delays and facilitating swift closure of insolvency cases.

Preserving Business Relationships: Insolvency proceedings often strain relationships between creditors, debtors, suppliers, and other stakeholders involved in the resolution process. Mediation by an expert committee promotes collaboration and cooperation among parties, helping to preserve essential business relationships and foster goodwill for future transactions.

Customized Solutions: Mediation by an expert committee allows parties to tailor solutions to their specific needs and interests, rather than relying on standardized or adversarial approaches to dispute resolution. The flexibility inherent in mediation enables parties to explore creative and innovative solutions that may not be achievable through traditional litigation.

Enhancing Creditor Recovery: The ultimate objective of insolvency proceedings is to maximize creditor recovery while preserving the value of the debtor’s assets. Mediation by an expert committee facilitates negotiated settlements that prioritize creditor interests and optimize asset realization, leading to higher recovery rates and improved outcomes for stakeholders.

Complementing Adjudicatory Processes: While mediation by an expert committee offers a voluntary and consensual approach to dispute resolution, it complements adjudicatory processes under the IBC, such as resolution plans and liquidation proceedings. Parties may opt for mediation at various stages of the insolvency process to explore settlement options in parallel with formal adjudication.

In conclusion, mediation by an expert committee plays a vital role in the Insolvency and Bankruptcy Code by facilitating consensual resolution, addressing complex disputes, promoting timely resolution, preserving business relationships, providing customized solutions, enhancing creditor recovery, and complementing adjudicatory processes. By leveraging the expertise of qualified mediators and offering a structured framework for negotiation, mediation contributes to the efficient and effective resolution of insolvency cases, ultimately benefiting all stakeholders involved.

“I believe it has the potential to create a win-win situation for all stakeholders and litigators involved.” Mr. Jatin Sharma, Advocate added in last.

Ref.: “Circular IBBI/PR/2024/08 Introduces Mediation in IBC via IBBI Expert Committee”