Insolvency and Bankruptcy Code

What is the Insolvency and Bankruptcy Code (IBC)?

The Insolvency and Bankruptcy Code, 2016 (IBC) is a comprehensive legislation enacted on 28 May 2016 that provides a unified, time-bound framework for resolving insolvency and bankruptcy of corporate persons, partnership firms, and individuals in India. Before IBC, insolvency resolution was governed by multiple, overlapping laws (SICA, BIFR, Companies Act, SARFAESI, Recovery of Debts Act) resulting in delays of 6-8 years for resolution and very low recovery rates.

The IBC introduced the Corporate Insolvency Resolution Process (CIRP), which must be completed within 330 days (180 days + one extension of 90 days + 60 days as per Supreme Court in Essar Steel). A Committee of Creditors (CoC) -- comprising financial creditors -- drives the resolution process. They evaluate resolution plans and approve one by a 66% vote (reduced from 75% by the 2019 amendment). If no resolution plan is approved, the company goes into liquidation.

The institutional framework comprises the Insolvency and Bankruptcy Board of India (IBBI) as the regulator, Insolvency Professionals (IPs) as practitioners, Insolvency Professional Agencies (IPAs), Information Utilities (IUs) for storing financial data, and the National Company Law Tribunal (NCLT) as the adjudicating authority. The IBC fundamentally shifted India's insolvency regime from a "debtor-in-possession" model to a "creditor-in-control" model.

Key Features

Current Status / Latest Data

• Cases admitted (cumulative, June 2025): 8,492 CIRP cases; 1,905 ongoing.
• Recovery rate: Improved from 28.3% in FY24 to 36.6% in FY25 (Economic Survey 2025-26). Pre-IBC recovery rate was only 15-20%.
• S&P upgrade: S&P Global upgraded India's insolvency regime from Group C to Group B (December 2025), recognising improved recovery rates (~30%) and reduced timelines (~2 years vs 6-8 years pre-IBC).
• Debt resolved: Over Rs 26 lakh crore resolved directly or indirectly through IBC in nine years (CRISIL, July 2025).
• Timeline challenge: Average CIRP completion time is 713 days overall and 853 days for cases closed in FY25 -- well above the 330-day statutory limit.
• NCLT backlog: ~30,600 cases pending (March 2025); estimated clearance time of ~10 years at current disposal rates.
• IBC Amendment Bill 2025: Proposes measures to improve admission timelines, streamline liquidation, and address procedural delays.
• NCLT benches: Currently 16 benches across India; capacity inadequate for case volume.

UPSC Exam Corner

Prelims: Key Facts

• IBC enacted in May 2016; CIRP must be completed within 330 days
• Adjudicating authority: NCLT (for companies); DRT (for individuals)
• Regulator: IBBI (Insolvency and Bankruptcy Board of India)
• CoC (Committee of Creditors) approves resolution plan by 66% vote
• Section 29A bars wilful defaulters from submitting resolution plans
• Recovery rate improved from ~15-20% (pre-IBC) to ~36.6% (FY25)
• S&P upgraded India's insolvency regime from Group C to Group B (December 2025)

Mains: Probable Themes

1. Evaluate the effectiveness of the Insolvency and Bankruptcy Code in resolving corporate insolvency in a time-bound manner. What are the key bottlenecks?
2. Discuss the role of NCLT capacity constraints in undermining the IBC's time-bound resolution framework. What reforms are needed?
3. Analyse the evolution of the IBC through judicial interpretation -- the significance of Essar Steel, Swiss Ribbons, and other landmark cases
4. Has the IBC achieved its objective of shifting from a debtor-friendly to a creditor-friendly regime? Critically examine with reference to recovery rates and timelines

Sources: IBBI Official, PRS India - IBC Amendment Bill 2025, CRISIL - IBC 9 Years, IBC Law - Recovery Rate FY25