IBBI Expert Committee suggests introduction of voluntary mediation under IBC

An expert panel set up by the Insolvency and Bankruptcy Board of India (IBBI) has recommended the introduction of voluntary mediation as a complementary mechanism for the resolution of disputes under the Insolvency and Bankruptcy Code (IBC).

“The mediation framework under the Code (IBC), as recommended by the Committee, would best operate as a self-contained blueprint within the Code, with independent infrastructure to ensure that the objectives of the Code are met without compromising or diluting the basic structure of the Code in terms of timelines, public rights,” said the report of the expert committee headed by TK Viswanathan, which has been submitted to the IBBI.

It has recommended a phased introduction of voluntary mediation as a dispute resolution mechanism under the Code while maintaining the sanctity of the timelines for various existing insolvency resolution processes. The core essence of the framework is its independence and flexibility to provide room for quick incorporation of implementational learning.

It has suggested establishment of a dedicated and specialised NCLT- annexed insolvency mediation cell with an independent secretariat to administer, oversee, and manage the conduct of insolvency mediations under the Code.

“The Committee has taken a cautious approach and endeavoured to balance the fundamental objectives of the Code, that is ‘time-bound reorganisation’ and ‘maximisation of value’, with autonomy to parties to voluntarily opt for the ‘out-of-court’ mediation process to enhance the efficiency of the insolvency resolution process,” said an official release.

Experts note that the recommendations of the Expert Committee on the framework for use of Mediation under the IBC come in light of the newly introduced Mediation Act, 2023. Yogendra Aldak, Partner at Lakshmikumaran & Sridharan Attorneys said the Committee’s recommendations are primarily aimed at providing a voluntary process parallel to the insolvency proceedings as laid down under the IBC. “There shall be no delays in the resolution process and depending on the stage at which mediation has been referred, the mandate of the mediator is envisioned to be limited to 30 to 60 days. Critically, no settlement between the parties can bypass the waterfall mechanism,” he said.

Third-party rights may get affected by such mutual settlements under mediation. However appropriate mechanisms have been provided for their redressal, he further said.

Also read: Go First insolvency: NCLT extends deadline by 60 days to complete resolution process