IBBI's Proposed Mediation Mechanism: A New Era for Operational Creditors

The Insolvency and Bankruptcy Board of India (IBBI) suggests a mediation process for operational creditors to ease the load on the Adjudicating Authority. The initiative, based on expert recommendations, aims to settle disputes early, decreasing formal insolvency application numbers.

The Insolvency and Bankruptcy Board of India (IBBI) is considering introducing a voluntary mediation process for operational creditors under the IBC regulations. This proposal aims to alleviate the burden on the Adjudicating Authority (AA) and expedite case admissions.

Rooted in an expert committee's findings and further endorsed by the Indian Institute of Insolvency Professionals of ICAI (IIIPI), this initiative provides operational creditors with an option to resolve disputes with corporate debtors on issues such as contractual disagreements and underpayment claims.

Data indicates that operational creditors typically seek repayment rather than debtor resolution. Of the 21,466 cases filed by April 2024, merely 3,818 were admitted. The IBBI is seeking feedback on draft regulations, with the aim to formalize the rules later.