Introduction to Insolvency and Bankruptcy Code (IBC)
The Insolvency and Bankruptcy Code (IBC) was enacted on May 28, 2016, to address India's escalating bad-loan crisis and streamline corporate-debt resolution.
Key Milestones and Impact
- Synergies-Dooray Automotive was the first company resolved under IBC in 191 days by August 2, 2017.
- In ten years, 7,102 cases were closed under IBC; 1,419 through resolution plans.
- Originally targeting the "dirty dozen" with ₹3.45 trillion NPAs, IBC has significantly altered India's debt recovery landscape.
Challenges and Criticisms
- Resolution time increased from 270 days to 744 days by March 2026, exceeding the mandated 330 days.
- Recoveries under resolution plans have declined, with realization dropping to 30.56% of claims by March.
- Realization relative to liquidation value fell from 170% in March 2025 to 167% in March 2026.
Strengthening NCLT Benches
The Ministry of Corporate Affairs is working to bolster the National Company Law Tribunal (NCLT) to address delays caused by insufficient capacity.
- NCLT had only 53 members in position against 62 sanctioned posts as of February 2026.
Pre-admission Withdrawals and Settlements
IBC's credible threat has led to pre-admission withdrawals totaling ₹14.61 trillion across 32,179 companies.
Amendments and Reforms
The IBC has undergone seven amendments since 2016, including:
- 2017: Section 29A was inserted to exclude willful defaulters from the resolution process.
- 2018: Homebuyers were granted the status of financial creditors.
- 2021: Pre-packaged insolvency framework introduction for MSMEs.
- 2026: Overhaul for creditor-led insolvency resolution and cross-border insolvency provisions.
Future Directions
Focus areas for future improvements include:
- Reconsidering the treatment of operational creditors, especially MSMEs, who realized only 10% of claims.
- Operationalizing individual insolvency for partnerships and proprietorships.
- Reducing litigation-driven delays and enhancing the efficiency of insolvency professionals.
