Icra Calls for Distinct Framework to Handle Small-Ticket Insolvency Cases Before NCLT

Icra Seeks Separate Framework for Small-Ticket Insolvency Cases

Rating agency Icra has pitched for a separate framework for small-ticket insolvency cases before they reach the National Company Law Tribunal (NCLT). According to the agency, such a mechanism would reduce pressure on the tribunal and help expedite admissions for larger accounts.

The suggestion comes amid persistent delays in the insolvency process, with nearly 78 per cent of ongoing corporate insolvency resolution process (CIRP) cases having crossed the prescribed 270-day limit as of March 2026. The pre-packaged insolvency resolution process (PPIRP), introduced for MSMEs, was aimed at easing resolution for smaller firms, but its implementation has remained limited, with only 10 plans approved over the last five years.

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The report highlights a dip in the number of resolution plans cleared in the subsequent two years, following a record number of resolution plan approvals in FY24. In Q4FY26, only 43 resolution plans were approved, a sharp dip of 43 per cent quarter-on-quarter and 39 per cent year-on-year. This fall in approved resolution plans follows the decline in cases admitted in the National Company Law Tribunal in FY26 compared to FY25, as debtors have been proactively looking to settle with lenders before insolvency proceedings are initiated, with pre-admission resolution rates being upwards of 80 per cent.

The improvement in approved resolution plans would depend on continued strengthening of NCLT benches and an increase in tribunal members, as manpower shortages and infrastructure constraints continue to weigh on the timely implementation of the code. The government and the Insolvency and Bankruptcy Board of India (IBBI) have taken several steps, including amendments to the IBC enacted in April 2026 and efforts to improve the NCLT infrastructure and manpower, which are expected to drive better recovery and lower resolution timelines.

Recent amendments placing the onus on the NCLT for timelines, introducing piecemeal and group resolution, and an out-of-court settlement framework are expected to be positive from an overall recovery perspective. The report also stresses that quicker disposal of legacy cases would remain critical to improving recoveries, saying a swifter resolution of legacy cases would be critical to the success of the code. The high share of legacy cases continues to choke the bandwidth of the NCLT benches, which are already plagued by manpower issues, resulting in lower recovery/sizeable haircuts for lenders.