The Insolvency and Bankruptcy Code (IBC), 2016 has significantly transformed India’s insolvency resolution framework. However, delays in resolution continue to undermine its effectiveness. Discuss.

The Insolvency and Bankruptcy Code (IBC), 2016 established a unified, timebound framework for resolving insolvency of individuals and corporate entities.

By shifting the focus from debtor protection to creditor-driven resolution, the IBC aims to maximise asset value, improve credit discipline and strengthen the banking system.

Achievements of the IBC:

• Improved Credit Discipline: The threat of losing control over the company has encouraged promoters to settle dues before admission into the Corporate Insolvency Resolution Process (CIRP), improving the repayment culture.
• Reduction in NPAs: Faster resolution of stressed assets has contributed to a decline in Non-Performing Assets (NPAs) and improved the health of the banking sector.
• Time-bound Institutional Framework: The Code introduced a structured insolvency process involving moratorium, Resolution Professional, Committee of Creditors (CoC) and liquidation, replacing multiple fragmented laws.

Successful Resolutions

• Essar Steel: Recovery of 92% of ₹49,000 crore.
• Bhushan Steel: Recovery of 64% of ₹56,022 crore.
• Binani Cement: Full recovery of ₹6,469 crore. Challenges
• Delays in Resolution: Despite a statutory limit of 330 days, resolution plans take around 580 days on average, while liquidation takes 499 days (Economic Survey 2024-25).
• Burden on NCLT: Apart from admitting insolvency applications, the NCLT has to adjudicate several disputes that arise during CIRP, such as disputes over creditors' claims, valuation of assets, actions of the Resolution Professional and approval of resolution plans. Frequent appeals and procedural challenges further increase the workload of NCLT/NCLAT, resulting in delays in completing insolvency proceedings.
• Weak Information Utilities (IUs): Underdeveloped Information Utilities delay verification of claims due to the absence of reliable financial information.
• Delays within the Committee of Creditors (CoC): Differences among creditors regarding valuation, feasibility of resolution plans and distribution of proceeds prolong decision-making.
• Excessive Litigation: Frequent legal challenges by promoters, operational creditors and resolution applicants delay completion of CIRP.
• Shortage of Insolvency Professionals: Limited availability of trained Insolvency Professionals and concerns regarding misuse of powers affect the quality and speed of the resolution process.
• Large Haircuts: Significant deterioration in asset value before admission often results in steep haircuts for creditors, discouraging timely initiation of insolvency proceedings.

Way Forward

• Establish dedicated NCLT benches and strengthen institutional capacity.

Improve Information Utilities for faster claim verification.

Develop a vibrant secondary market for stressed assets and Asset Reconstruction Companies (ARCs).

Strictly enforce statutory timelines for admission and completion of CIRP.

Implement the IBC (Amendment), 2026, including time-bound admission of cases, group insolvency framework, stronger creditor rights and timebound disposal of appeals.

The IBC has fundamentally transformed India's insolvency ecosystem by improving credit discipline and strengthening the banking sector. However, addressing institutional bottlenecks and ensuring timely resolution will be essential to maximise value recovery, enhance investor confidence and support India's investment-led growth.