The Insolvency and Bankruptcy Code (IBC), 2016 is a comprehensive legislation enacted to consolidate and streamline the process of insolvency resolution for companies, partnership firms, and individuals in India. Before the introduction of the IBC, insolvency proceedings were governed by multiple laws such as the Sick Industrial Companies Act (SICA), Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI), and the Companies Act, which often resulted in lengthy and inefficient resolution processes. The IBC introduced a unified and time-bound framework to address insolvency and facilitate faster resolution of distressed assets.

Under the IBC framework, when a company defaults on its debt obligations, creditors can initiate the Corporate Insolvency Resolution Process (CIRP). The process is overseen by the National Company Law Tribunal (NCLT), while an independent insolvency professional manages the company during the resolution period. The law originally mandated that the resolution process be completed within 180 days, extendable up to 330 days, failing which the company could be liquidated. This framework was designed to maximise asset value, protect creditor interests, and improve credit discipline in the corporate sector.

The IBC has significantly transformed India’s financial ecosystem by strengthening creditor rights and improving the recovery of bad loans. It has also improved India’s ranking in the World Bank’s Ease of Doing Business index under the parameter of resolving insolvency. By enabling faster resolution of stressed assets and reducing the burden of non-performing assets (NPAs) in the banking sector, the IBC plays a critical role in enhancing financial stability and promoting responsible corporate governance.

The government is proposing amendments to the Insolvency and Bankruptcy Code (IBC) and the Companies Act, 2013 to address operational challenges and improve the efficiency of India’s insolvency resolution framework. Since its implementation in 2016, the IBC has significantly improved creditor recovery and corporate accountability. However, practical experience over the years has revealed several procedural delays, legal complexities, and capacity constraints within the insolvency ecosystem.

One of the key concerns has been the delay in admission of insolvency cases by the National Company Law Tribunal (NCLT). Although the law envisages a time-bound resolution process, in practice many cases remain pending for long periods before the insolvency process even begins. These delays reduce the value of distressed assets and discourage timely resolution. The proposed amendments aim to streamline procedures and reduce the time taken for admitting insolvency applications.

Additionally, amendments to the Companies Act are intended to strengthen corporate governance and align regulatory provisions with evolving economic realities. As India’s corporate sector grows more complex and integrated with global markets, legal frameworks must evolve to address emerging challenges. By updating these laws, the government seeks to create a more efficient, transparent, and investor-friendly business environment that supports economic growth and financial stability.

The proposed amendments to the Insolvency and Bankruptcy Code aim to improve the efficiency and effectiveness of insolvency resolution in several ways. One important reform involves reducing delays in the admission of insolvency applications. Currently, there can be significant delays before the National Company Law Tribunal (NCLT) formally admits a case and initiates the Corporate Insolvency Resolution Process (CIRP). Streamlining these procedures would ensure that resolution proceedings begin quickly, preventing further deterioration of the debtor company’s assets.

Another expected improvement involves enhancing the functioning of the insolvency ecosystem, including insolvency professionals, creditors’ committees, and adjudicating authorities. Clearer procedural rules and improved institutional capacity can help reduce litigation and improve coordination among stakeholders involved in the resolution process. Faster resolution helps preserve the value of distressed assets and increases recovery rates for creditors.

The amendments may also focus on improving the balance between resolution and liquidation. The core objective of the IBC is to revive viable companies rather than merely liquidate them. By strengthening mechanisms for restructuring and resolution, the amendments can help ensure that financially stressed but potentially viable companies are given opportunities for revival. This approach supports economic growth by preserving jobs, protecting productive assets, and maintaining financial stability.

Although the Insolvency and Bankruptcy Code (IBC) has been widely regarded as a transformative reform, its implementation has revealed several challenges. One major issue is the delay in insolvency resolution. While the code originally envisaged a resolution process within 180 to 330 days, many cases have exceeded this timeline due to legal disputes, procedural bottlenecks, and capacity constraints in adjudicating bodies such as the National Company Law Tribunal (NCLT).

Another challenge relates to excessive litigation. Insolvency cases often involve multiple stakeholders—including creditors, promoters, and potential bidders—who may challenge decisions in courts. This can prolong the resolution process and reduce the value of distressed assets. Additionally, concerns have been raised about the operational capacity of the insolvency ecosystem, including the availability of trained insolvency professionals and the workload faced by tribunals.

There have also been debates regarding the balance between creditor rights and the interests of other stakeholders such as employees and operational creditors. While the IBC prioritises financial creditors in decision-making through the Committee of Creditors (CoC), some stakeholders argue that this structure may not always ensure equitable outcomes. Addressing these challenges through legislative amendments and institutional strengthening is essential for maintaining the effectiveness of the insolvency framework.

The introduction of the Insolvency and Bankruptcy Code has had a profound impact on India’s banking sector and corporate landscape. One of its most significant achievements has been improving the recovery of distressed loans and reducing the burden of non-performing assets (NPAs) in the banking system. By empowering creditors to initiate insolvency proceedings and take control of defaulting companies, the code strengthened credit discipline among borrowers.

Another positive impact has been the improvement in India’s investment climate. A predictable and transparent insolvency framework is essential for attracting domestic and foreign investment. Investors are more willing to provide capital when they know that there are clear mechanisms for resolving financial distress. The IBC has therefore contributed to improving India’s reputation as a business-friendly destination.

However, the code has also faced criticism. Delays in the resolution process and frequent litigation have sometimes undermined the goal of time-bound insolvency resolution. In some cases, large haircuts taken by banks during resolution have raised concerns about the effectiveness of asset recovery. Therefore, while the IBC has been a landmark reform, continuous improvements and institutional strengthening are necessary to ensure that it fully achieves its objectives.

Several high-profile corporate insolvency cases have demonstrated the practical impact of the Insolvency and Bankruptcy Code in resolving distressed assets. One prominent example is the resolution of Bhushan Steel, which was acquired by Tata Steel through the insolvency process. The resolution helped recover a significant portion of outstanding loans for creditors and allowed the company to continue operating under new management.

Another notable case is the resolution of Essar Steel, one of the largest insolvency cases in India. After a prolonged legal process, the company was eventually acquired by ArcelorMittal and Nippon Steel through the IBC framework. This case established important legal precedents regarding the authority of the Committee of Creditors and the treatment of operational creditors in the resolution process.

These examples illustrate how the IBC framework can facilitate the restructuring and revival of distressed companies rather than forcing them into liquidation. By enabling the transfer of assets to financially stronger entities, the insolvency process helps preserve economic value, maintain employment, and improve the overall efficiency of the corporate sector.

In such a scenario, creditors such as banks or financial institutions can initiate the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code. The process begins when a creditor files an application before the National Company Law Tribunal (NCLT). If the tribunal admits the case, a moratorium is imposed on the company’s operations, preventing further legal action by creditors while the resolution process is underway.

Once the case is admitted, an insolvency professional is appointed to manage the company’s operations. The professional works with the Committee of Creditors (CoC), which primarily consists of financial creditors such as banks, to evaluate potential resolution plans. Interested investors or companies may submit proposals to acquire or restructure the distressed firm. The CoC evaluates these plans and selects the one that maximises recovery for creditors while ensuring the company’s viability.

If a viable resolution plan is approved within the prescribed timeframe, the company can be revived under new ownership or management. If no suitable plan emerges, the company may proceed to liquidation. This structured process ensures transparency, maximises asset value, and provides an orderly mechanism for resolving corporate distress, thereby strengthening the stability of India’s financial system.