This alleged attempt to influence a judicial decision underscores a growing trend: the erosion of the IBC's initial promise of fairness and efficiency. Instead of a streamlined process focused on maximizing asset recovery for creditors, the NCLT and NCLAT are increasingly becoming battlegrounds where powerful vested interests exert undue pressure, often subverting the very principles the Code was designed to uphold. The sanctity of the resolution process is now under serious threat, and the delicate balance of power between debtors and creditors is being disrupted by the subtle but pervasive influence of those who hold sway over the system

Forover three decades, I have chronicled the rise and fall of Indian corporates, with a particular lens on Hyderabad’s business landscape—from the liberalisation boom of the 1990s to the post-2008 global meltdown. I have seen dozens of empires built on ambition crumble under reckless leverage and mounting debts.

But the most unsettling shift came with the Insolvency and Bankruptcy Code (IBC) of 2016, hailed as a transformative tool to resolve the country’s Rs 10 lakh crore bad loan crisis transparently and swiftly.

As a former Senior Editor at India’s largest financial daily, I reported on early IBC successes. Now, as an advocate at the Telangana High Court, I navigate its convoluted processes. What alarms me today is the insidious web of influence—through power, money, or personal ties—turning the National Company Law Tribunal (NCLT) and its appellate body, the National Company Law Appellate Tribunal (NCLAT), into arenas of manipulation.

Patterns of judicial pressure:

The recent recusal by NCLAT's Justice Sharad Kumar Sharma in an insolvency case, after being approached by one of the "most revered members of the higher judiciary" for a favourable order, is not an aberration. It is a symptom of a deeper malaise.

The incident, reported widely on Tuesday, unfolded at NCLAT's Chennai bench during the hearing of Attluru Sreenivasulu Reddy vs. M/s. AS Met Corp Pvt. Ltd. & Anr., an appeal against the admission of a Hyderabad-based company into the Corporate Insolvency Resolution Process (CIRP).

Justice Sharma, a judicial member, disclosed in open court that he had received a message on his mobile phone from this influential figure, prompting his immediate recusal. The bench, including technical member Jatindranath Swain, expressed "anguish" and referred the matter to the NCLAT chairperson for reassignment.

Notably, Justice Sharma’s recusal wasn't an isolated incident. Similar influence was exerted in cases linked to Shri Ramalinga Mills, Jeppiar Cements, and Byju's, each prompting his withdrawal on grounds ranging from respondent pressure to conflicts of interest. The recurrence points towards a potential systemic flaw in the judiciary’s insulation from both external and internal interference, raising questions about how many such attempts go undisclosed or succeed.

This alleged attempt to influence a judicial decision underscores a growing trend: the erosion of the IBC's initial promise of fairness and efficiency. Instead of a streamlined process focused on maximizing asset recovery for creditors, both NCLT and NCLAT are increasingly turning into battlegrounds where powerful vested interests exert undue pressure, often subverting the very principles the Code was designed to uphold. The sanctity of the resolution process is now under serious threat, and the delicate balance of power between debtors and creditors is being disrupted by the subtle but pervasive influence of those who hold sway over the system.

My fellow financial journalists, who chronicled India’s infamous corporate scandals like the Harshad Mehta scam in 1990s and the Satyam Computers’ accounting fraud in 2009, can see clear parallels in how the regulatory bodies were exploited by the vested interests.

The 'cash-for-orders' racket:

Under the IBC, the tribunals, NCLT and NCLAT, are gatekeepers for admitting companies into insolvency, approving resolution plans, and overseeing asset sales.

Yet, investigations by the Central Bureau of Investigation (CBI) reveal a "cash-for-orders" racket plaguing these tribunals. The investigating agency booked a Mumbai-based advisory firm in March this year for allegedly bribing NCLT members to decide favourably an insolvency matter. Raids unearthed transaction records revealing that middlemen, often registry staff or intermediaries, brokered bench assignments in exchange for hefty bribes. Promoters of defaulting companies and deep-pocketed acquirers hopped onto this well-oiled corruption machine to manipulate outcomes, stall admissions, or secure undervalued asset buyouts.

The stakeholders complicit in this corruption habitually forms a nexus that undermines the IBC's core objective: maximizing creditor recoveries while preventing asset stripping. Defaulting companies, often promoters of debt-laden firms, wield influence to stall CIRP admissions or orchestrate sham settlements.

Politicians in fray-Shielding crony capitalists:

Politicians enter the fray through opaque connections, often shielding crony capitalists. While direct evidence is scarce due to the IBC's quasi-judicial nature, whispers in corporate corridors echoed in my interactions with insiders, point to political pressure in high-profile cases of insolvencies. The judiciary's internal influences, as exposed in Justice Sharma's case, suggest a hierarchical rot where "revered" higher court figures lobby for parties, eroding impartiality.

Legal professionals and insolvency experts, meant to uphold the Code, often double as fixers: CBI probes have shown advisory firms conspiring with resolution professionals to sway outcomes for payoffs.

The influence-peddling facilitates fraudulent company takeovers, turning the IBC into a tool for asset laundering. Under Sections 43 (preferential transactions), 45 (undervalued), 49 (defrauding creditors), and 66 (fraudulent trading), tribunals can void deals, but powerplays and payoffs let them slip through. The Supreme Court unraveled resolution plans tainted by fraud, and how acquirers use benami entities or rigged valuations to acquire firms cheaply.

Beyond the tribunals-Judiciary under scrutiny:

Historical instances of judicial impropriety, ranging from the 1993 impeachment of Justice V Ramaswami to the 2011 case involving Justice Soumitra Sen, revealed that the reach of corruption extends deeper than just regulatory bodies. An alarm was raised in 2025 when burnt currency worth crores was allegedly found near the residence of Justice Yashwant Varma of the Allahabad High Court.

These episodes, often involving politicians and moneyed interests, underscore how external pressures, whether through appointments, post-retirement perks and posts, or outright bribes, compromise judicial integrity across levels.

The way forward-Systemic fixes:

From my vantage, having advised on IBC matters post-journalism, the solution lies in radical reforms to restore integrity and efficiency to the NCLT and NCLAT: mandatory audio-video recordings of all hearings to promote transparency and deter misconduct; robust whistleblower protections for tribunal members and staff to safely report influence peddling or corruption; empowering the Insolvency and Bankruptcy Board of India (IBBI) with investigative powers to independently probe allegations of bribery, favoritism, or procedural lapses; and mandating that judges pronounce detailed, reasoned orders in every case to ensure accountability, prevent arbitrary rulings, and align with Supreme Court directives emphasising the need for clear justifications, especially in rejecting insolvency resolution plans.

Additional radical reforms can be suggested for the broader Indian judiciary, drawing from ongoing criticisms and expert analyses.

These include prohibiting political appointments to judicial and quasi-judicial bodies to avoid cronyism; instituting mandatory, continuous domain-specific training programs for tribunal members to address gaps in expertise; promptly filling vacancies with individuals of impeccable integrity and relevant knowledge to prevent operational breakdowns; enforcing stricter ethical guidelines adapted from High Court codes of conduct; establishing clear accountability mechanisms such as regular performance audits, swift disciplinary proceedings for indiscipline, and an independent oversight body for complaints; and enhancing infrastructure for e-filing, virtual hearings, and case management to reduce delays.

Justice Sharma’s repeated recusals—borne of transparency rather than compulsion—should serve as a wake-up call. Only systemic change, not piecemeal oversight, can rescue India's insolvency framework from the grip of vested interests.

Without these, the IBC risks becoming another failed experiment, like the pre-2016 Sick Industrial Companies Act and India's corporate revival will remain a mirage.

(The author is former Senior Editor, The Economic Times, currently practicing as an advocate at the Telangana High Court)