Voluntary Mediation Proposed for Faster Dispute Resolution in Indias Insolvency Law

In a significant move to enhance the efficiency of the insolvency resolution process in India, an expert panel has recommended the introduction of voluntary mediation as a dispute resolution mechanism under the Insolvency and Bankruptcy Code (IBC).

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Voluntary mediation refers to the process of referring a matter for mediation by mutual agreement among the parties involved. This approach allows for a collaborative resolution of disputes outside the formal court system.

Expert Committee's Mandate

The expert committee was constituted by the Insolvency and Bankruptcy Board of India (IBBI) to examine the potential of mediation in resolving disputes arising under the IBC. The IBC, which came into effect in 2016, provides a time-bound and market-linked framework for the resolution of stressed assets.

Phased Introduction of Voluntary Mediation

The expert panel has proposed a phased introduction of voluntary mediation as a dispute resolution mechanism under the IBC. This approach aims to maintain the sanctity of the timelines prescribed for various insolvency resolution processes while incorporating the benefits of mediation.

Dedicated Insolvency Mediation Cell

To facilitate the implementation of voluntary mediation, the panel has recommended the establishment of a dedicated and specialised insolvency mediation cell annexed to the National Company Law Tribunal (NCLT). This cell will be equipped with an independent secretariat to administer, oversee, and manage the conduct of insolvency mediations under the IBC.

Balancing Objectives and Autonomy

The expert panel has taken a cautious approach in its recommendations, seeking to balance the fundamental objectives of the IBC, namely time-bound reorganisation and maximisation of value, with the autonomy of parties to voluntarily opt for out-of-court mediation. This approach aims to enhance the efficiency of the insolvency resolution process while preserving the core principles of the IBC.

Self-Contained Blueprint within the IBC

The mediation framework proposed by the committee is envisioned as a self-contained blueprint within the IBC. It will operate with independent infrastructure to ensure that the objectives of the Code are met without compromising timelines, public rights, or the basic structure of the insolvency resolution process.

The introduction of voluntary mediation as a dispute resolution mechanism under the IBC holds promise for enhancing the efficiency and effectiveness of the insolvency resolution process in India. By providing a collaborative and consensus-based approach to resolving disputes, voluntary mediation can contribute to faster and more amicable resolutions, ultimately benefiting all stakeholders involved.