Background
On February 14, 2024, the Insolvency and Bankruptcy Board of India (IBBI) released a report recommending a voluntary mediation framework for various IBC processes. The expert committee, led by Dr. T. K. Viswanathan, explored the feasibility of integrating mediation into the IBC system. A new framework aims to expedite dispute resolution and ease caseloads within the Insolvency and Bankruptcy Code (IBC) by offering a voluntary mediation option. The initial recommendation suggests a voluntary system.
Key Highlights of the report are as follows
Self-contained Framework
The report proposes a dedicated mediation framework within the IBC, encompassing:
- Seamless integration of mediation within existing timelines and processes, avoiding disruption.
- Establishing an in-house mediation secretariat/mediation cell annexed with NCLT for streamlined coordination.
- Defining timeframes for the mediation process.
- Recognizing and enforcing Mediation Settlement Agreements (MSAs) under the Code.
- Addressing mediator appointment and removal processes.
- Implementing online and paperless mediation options for efficiency.
Initial Scope
Participation in mediation will be entirely voluntary for parties involved in insolvency disputes.
- Initially, the framework excludes Corporate Insolvency Resolution Process (CIRP) applications filed by Financial Creditors (FCs)/Corporate Debtor (CDs) themselves.
- It will initially apply to CIRP applications filed by Operational Creditors (OCs) only.
Applicable Processes
The framework identifies specific insolvency resolution processes suitable for mediation, including:
- CIRP applications by OCs and Corporate Applicants.
- Pre-packs.
- Fast Track CIRP.
- Individual Insolvency - Personal Guarantor to Corporate Debtor (PG to CD) cases.
- Individual insolvency (other than PG to CD cases).
- Specific processes within CIRP: claim collation, inter-creditor issues at CoC level, applications under Section 60(5).
- Avoidance actions in individual insolvencies.
Cost Sharing
Mediation costs will be shared equally by participating parties unless mutually agreed otherwise.
CIRP Cost Exclusion
Mediation costs incurred during CIRP will not be considered part of the overall CIRP cost pool.
Mediator Pool
The framework proposes two mediator pools:
- Primary Pool: Composed of experienced professionals like retired NCLT/NCLAT members, senior advocates in insolvency, ex-financial sector officials, and insolvency professionals with over 10 years of experience.
- Additional Pool: Includes legal practitioners with at least 10 years of experience in insolvency disputes, experienced commercial mediators, and professionals with technical expertise in insolvency, accounting, valuation, or relevant industry operations (at least 10 years).
Training and Ethics
All mediators will receive proper training and adhere to a strict code of ethics.
Potential Impact
This initiative has the potential to significantly improve the efficiency and effectiveness of the IBC process by offering a faster, more cost-effective, and consensual method for dispute resolution.
Access the full report at: ibbi.gov.in.
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