AI Enters Judicial Process With Mandatory AI Use in Insolvency Process Planned

New Delhi, Oct 3 (KNN) The Indian government is considering making it mandatory for resolution professionals (RPs) to use Artificial Intelligence (AI) agents in insolvency proceedings to enhance efficiency, transparency, and accuracy.

According to a report by the Insolvency and Bankruptcy Board of India (IBBI), AI adoption can help address challenges such as delayed case resolutions, fraudulent practices, and the massive volume of financial data that professionals need to analyse.

The board stated that AI tools could streamline compliance, automate documentation, detect anomalies, and strengthen stakeholder communication.

Currently, insolvency professionals use AI applications like ChatGPT mainly for summarising legal judgments and supporting legal research. However, the IBBI report highlighted that many AI use cases remain underutilised.

The report identified several potential AI agents tailored for insolvency processes. Fraud detection agents, for instance, could help identify preferential, undervalued, fraudulent, and extortionate (PUFE) transactions, along with concealed assets or other financial irregularities.

Insolvency prediction agents, on the other hand, could forecast recovery outcomes by analysing historical data, financial records, and case-specific variables.

These tools could also model scenarios like asset liquidation or restructuring and assess their potential results.

Experts believe AI could significantly speed up the Insolvency and Bankruptcy Code (IBC) process. “Millions of documents can be scanned quickly to filter out false claims, which will shorten timelines and even improve e-auctions through automated price-setting algorithms,” said Ricky Chopra, chairman and chief counsel, RCIC.

Globally, several countries are already integrating AI into insolvency practices. The UK’s National AI Strategy, launched in 2021, supports AI use in law enforcement, including insolvency. Finland’s KOSTI platform also leverages AI to enhance efficiency in insolvency cases.

With India’s growing caseload under the IBC, the move towards AI integration is seen as a step to modernise and accelerate the resolution process.

(KNN Bureau)