Voluntary Mediation Proposed to be Included Under Insolvency Law by Expert Panel

An expert panel has proposed implementing voluntary mediation as a method for resolving disputes under the insolvency law. The mediation framework within IBC will function as a self-contained blueprint within the Insolvency and Bankruptcy Code, 2016, with independent infrastructure to guarantee the achievement of IBC’s objectives.


The Insolvency and Bankruptcy Board of India (IBBI) announced that the panel suggested a gradual implementation of voluntary mediation as a method for resolving disputes under the IBC, while ensuring that the deadlines for current insolvency resolution processes are upheld.


In its 129-page report, the Committee has adopted a careful approach to balance the core objectives of the Code, such as “time-bound reorganisation” and “maximisation of value,” while allowing parties the freedom to choose the ‘out-of-court’ mediation process to improve the efficiency of the insolvency resolution process.


During the initial stage, it is suggested that the process be voluntary. However, the Committee proposed exploring mediations involving a financial creditor in the second phase of implementation. A specialised cell with an independent secretariat has been suggested by the panel to manage insolvency mediations under the Code.


The Committee also pointed out that not all circumstances covered by the IBC are suitable for resolution through mediation. For example, matters like avoidance transactions are not covered by mediation under the IBC. The panel of mediators may consist of retired members of the NCLT/NCLAT, senior advocates, successful insolvency proceedings, ex-senior officials of financial sector regulators, and others.