The Indian Insolvency and Bankruptcy Code – The way Forward

 

The Indian Insolvency and Bankruptcy Code – The way Forward

Introduction:

The Insolvency and Bankruptcy Code (IBC) of India, enacted in 2016, marked a watershed moment in the nation's economic reforms. Replacing a convoluted and ineffective maze of archaic laws, the IBC introduced a unified, time-bound, and creditor-driven framework for resolving corporate insolvency. Its primary objectives: maximizing the value of distressed assets, promoting entrepreneurship, ensuring availability of credit, and balancing the interests of all stakeholders. While the IBC has undeniably transformed India’s distressed asset landscape, its journey has been one of continuous learning and adaptation, marked by both formidable challenges and significant evolutionary modifications. This article delves into the complexities of its implementation, highlights key statutory and regulatory reforms, and proposes a roadmap for its continued strengthening, substantiated by recent statistics.

Major Issues faced in the implementation of the Insolvency and Bankruptcy Code (IBC) in India. These challenges are often interconnected and contribute to the overall effectiveness and efficiency of the resolution process

Issues in IBC Implementation

Delays and Procedural Issues:

Prolonged Resolution Time:

The IBC was envisioned as a time-bound process, with an initial target of 180 days, extendable to 330 days. However, the average time taken for CIRP to culminate in a resolution plan or liquidation consistently exceeds this. This delay erodes the value of the corporate debtor's assets, increases the resolution costs (including fees for the Resolution Professional and legal expenses), and ultimately leads to lower recoveries for creditors. The longer a company remains in limbo, the more its operational viability deteriorates.

Reason: This is a cascading effect of several factors, including judicial backlogs, frequent litigation, and inadequate infrastructure.

Judicial Backlogs and Shortage of Benches/Judges:

The National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) are the primary adjudicating authorities for IBC cases. They face a severe shortage of judicial and technical members relative to the massive influx of cases. This leads to delays at every stage: admission of applications, hearing of interim applications, approval of resolution plans, and disposal of appeals. The limited number of benches means fewer cases can be heard simultaneously, creating bottlenecks.

Impact: This directly contradicts the time-bound objective of the IBC and contributes significantly to value erosion.

Adjudication Process Inefficiencies:

Beyond the sheer volume of cases, the way NCLT and NCLAT proceedings are conducted can also be inefficient. This includes frequent adjournments, a lack of specialized knowledge among some members for complex financial or sector-specific cases, and procedural ambiguities that lead to prolonged arguments. Sometimes, even basic procedural requirements can cause significant delays.

Example: Debates over the 'admitted debt' or technical defects in applications can drag on, consuming valuable judicial time.

Delays in Admission of Cases:

While the IBC mandates a 14-day period for the NCLT to admit or reject an application for CIRP, in practice, this timeline is rarely met. Corporate debtors often raise various objections, sometimes frivolous, to delay the admission of the insolvency petition. This pre-admission litigation can last for several months, or even over a year, during which the corporate debtor's financial health may further deteriorate, leaving fewer viable assets for resolution.

Impact: This initial delay impacts the "going concern" principle, as the company continues to spiral downwards before formal intervention.

Multiplicity of Proceedings:

Despite the IBC being a comprehensive code, its interplay with other existing laws (e.g., Prevention of Money Laundering Act - PMLA, Securities and Exchange Board of India - SEBI regulations, Real Estate (Regulation and Development) Act - RERA, tax laws) often leads to parallel investigations or proceedings. This creates jurisdictional conflicts, diverts the attention and resources of the Resolution Professional, and can stall the CIRP or liquidation process, as assets may be provisionally attached by other agencies.

Example: ED attaching assets under PMLA can hinder asset monetization under IBC.

Value Realization and Creditor Concerns:

Low Recovery Rates/High Haircuts:

While the IBC has improved recovery rates compared to previous regimes, the "haircuts" (the difference between the admitted claim and the amount realized by creditors) remain substantial. Creditors, particularly financial creditors, often recover only a fraction of their outstanding dues. While some haircuts are inevitable in distressed situations, consistently deep haircuts raise questions about the code's ability to maximize value for all stakeholders.

Context: This is partly due to many cases being "legacy NPAs" that are already in an advanced state of distress when admitted to IBC, leaving little value to recover.

Ineffective Liquidation Process:

When a resolution plan fails or is not approved, the corporate debtor goes into liquidation. The liquidation process itself is often plagued by delays, challenges in asset identification and valuation, difficulties in finding buyers for distressed assets, and legal complexities. This leads to further value erosion and poor realization for creditors, making liquidation an unattractive outcome.

Reason: The absence of a robust distressed asset market and the stigma associated with buying assets from liquidation also contribute.

Identification and Realization of Avoidance Transactions:

The IBC provides for the clawback of preferential, undervalued, fraudulent, or extortionate credit transactions that occurred before the insolvency commencement date. However, identifying these transactions, gathering sufficient evidence, and successfully litigating them before the NCLT/NCLAT is a complex, time-consuming, and resource-intensive process. Promoters often conceal such transactions, making it difficult for the Resolution Professional to recover these assets for the creditors.

Impact: Failure to recover these assets directly reduces the pool available for creditor distribution.

Promoters Exploiting "Haircuts" and Loopholes:

Despite the introduction of Section 29A to bar defaulting promoters from reacquiring their companies, concerns persist about promoters attempting "backdoor entries" or using proxies to bid for their distressed assets at significantly reduced valuations after "cleaning" the company's balance sheet through the IBC process. While Section 29A addresses direct reacquisition, complex corporate structures and indirect influence can sometimes still pose challenges.

Perception: This can create a perception of unfairness where the original defaulters benefit from the system.

Creditor Hierarchy and Discrimination:

The IBC establishes a waterfall mechanism for the distribution of liquidation proceeds. While financial creditors generally have higher priority, there have been debates and concerns regarding the equitable treatment of various classes of creditors, particularly operational creditors and homebuyers (who were later recognized as financial creditors). Issues arise concerning the proportionality of recovery and potential for discrimination in resolution plans.

Example: Disputes over treatment of secured vs. unsecured financial creditors or the practical challenges faced by a large number of scattered operational creditors.

Stakeholder Behaviour and Capacity:

Behavioural Issues and Lack of Cooperation:

The success of IBC depends heavily on the cooperative behaviour of all stakeholders – debtors, creditors, Resolution Professionals, and even government agencies. However, often there's a lack of genuine cooperation. Debtors may resort to delaying tactics, frivolous litigation, or non-disclosure of information. Creditors, particularly a fragmented Committee of Creditors (CoC), may have divergent interests, leading to disagreements and delays in approving resolution plans.

Impact: This adversarial environment slows down the process and can undermine the objective of revival.

Professional Misconduct and Competence of IPs:

The role of Insolvency Professionals (IPs) is central to the IBC process. However, issues related to their competence, ethical conduct, and independence have emerged. Instances of IPs not adhering to strict timelines, lacking the specialized knowledge for complex cases, or facing conflicts of interest have been reported. There are also concerns about the quality of valuations provided by registered valuers.

Regulatory Challenge: Ensuring consistent high standards across the large and growing pool of IPs is a continuous challenge for the IBBI.

Capacity Building for Stakeholders:

Many stakeholders, including smaller creditors, operational creditors, and even some corporate debtors, may not fully understand the intricacies of the IBC. This lack of awareness can lead to delays, incorrect filings, or inability to effectively participate in the process, thereby undermining their rights and the efficiency of the resolution.

Need: There's a need for continuous education and awareness programs.

Information Asymmetry:

Accurate and comprehensive information about the corporate debtor's assets, liabilities, and business operations is crucial for informed decision-making by the Committee of Creditors and potential resolution applicants. However, obtaining this information can be challenging due to poor record-keeping by distressed companies, non-cooperation from erstwhile management, or issues with data accuracy from Information Utilities. This asymmetry hinders effective due diligence and robust bidding.

Specific Sectoral Challenges:

Complex Group Structures and Cross-Border Insolvency:

Many large Indian conglomerates operate through complex, multi-layered group structures, often with inter-company transactions and cross-guarantees. The IBC, in its initial form, was primarily designed for individual corporate debtors. Dealing with insolvency of a group where entities are interdependent and have assets/liabilities across different jurisdictions (cross-border insolvency) is highly complex, requiring a sophisticated legal framework that India is still developing.

Legal Gap: The absence of a specific group insolvency framework and a robust cross-border insolvency law leads to ad-hoc judicial interventions, which can be inconsistent.

Real Estate Sector Specific Issues:

The real estate sector presents unique challenges due to the large number of dispersed creditors (homebuyers), long project cycles, reliance on multiple regulatory approvals (RERA, local authorities), and often incomplete projects. Resolving real estate insolvencies involves complex issues of project completion, transfer of development rights, and managing the interests of thousands of homebuyers, making it particularly challenging for IPs and NCLTs.

Impact: This often leads to highly protracted and contentious CIRPs.

MSME Challenges:

While the Pre-Packaged Insolvency Resolution Process (PPIRP) was introduced for MSMEs to provide a quicker and less formal resolution, its adoption and effective implementation have faced hurdles. Many MSMEs lack the financial sophistication or resources to initiate and navigate even a pre-pack process, and concerns about potential abuse by promoters also exist.

Regulatory and Policy Gaps:

Evolving Jurisprudence and Inconsistency:

The IBC is a relatively new law, and its provisions are continuously being interpreted and refined by the NCLT, NCLAT, and the Supreme Court. While judicial interpretations are essential for clarity, frequent and sometimes conflicting pronouncements can lead to legal uncertainty, making it difficult for stakeholders to predict outcomes and plan strategies.

Impact: This can deter potential resolution applicants due to perceived legal risks.

Lack of Defined Thresholds for Haircuts:

There is no specific legal or regulatory guidance on what constitutes an "acceptable" haircut for creditors. This often leads to intense negotiations, disagreements within the CoC, and sometimes, challenges to approved plans based on the perceived inadequacy of the offered recovery, further delaying the process.

Debate: The balance between maximizing value and achieving quick resolution often leads to debates over the size of haircuts.

Challenges in Post-Resolution Monitoring:

Once a resolution plan is approved and implemented, there are limited formal mechanisms for monitoring the compliance of the new management with the terms of the plan, or the long-term viability of the resolved company. While the CoC is dissolved, the onus largely shifts to the creditors to enforce the plan's terms, which can be challenging, especially for larger consortiums or in cases of non-compliance after a period.

Risk: This lack of robust monitoring can lead to a return to distress if the plan is not properly executed.

These issues collectively highlight the need for continuous legislative, regulatory, and judicial reforms to ensure the IBC realizes its full potential as a transformative insolvency regime in India.

Modifications Done in the Recent Past to Make it a Robust System

The IBC has been subject to continuous amendments to address practical challenges and judicial pronouncements. These changes, both statutory amendments and regulatory tweaks, aim to enhance efficiency, transparency, and fairness.

Recognition of Homebuyers as Financial Creditors (IBC (Amendment) Act, 2018):

Initially, homebuyers were treated as operational creditors, often having limited say in the resolution process and receiving meagre recoveries. This amendment explicitly brought them under the ambit of 'financial creditors' with a deemed financial debt.

Impact: This was a monumental shift, giving homebuyers representation in the Committee of Creditors (CoC) through an authorized representative (AR) and a significant vote share, thereby empowering them to protect their interests in real estate insolvency cases. It addressed a major social and economic concern.

Introduction of Section 29A (Eligibility Criteria for Resolution Applicants - IBC (Amendment) Act, 2018):

This was a critical anti-cronyism measure. It disqualified certain categories of persons, including defaulting promoters and those connected to them, from submitting a resolution plan for the corporate debtor. The intent was to prevent "backdoor entry" by individuals who contributed to the company's financial distress.

Impact: This significantly enhanced the integrity of the resolution process and fostered a more credible market for distressed assets. It sent a strong signal that defaulting promoters would not be allowed to regain control at a steep discount without first clearing their past dues.

Introduction of Pre-Packaged Insolvency Resolution Process (PPIRP) for MSMEs (IBC (Amendment) Ordinance, 2021, later replaced by Act):

Recognizing the unique challenges faced by MSMEs (Micro, Small and Medium Enterprises), PPIRP was introduced as a faster and more cost-effective out-of-court resolution mechanism. It allows the existing management to remain in control (debtor-in-possession model) and present a base resolution plan, subject to creditor approval and NCLT oversight.

Impact: Aims to reduce the burden on NCLTs for smaller cases, preserve MSME businesses, and minimize disruption to their operations, thereby facilitating quicker resolutions and safeguarding jobs.

Mandatory Timeline for CIRP Completion (Initially 270 days, extended to 330 days - IBC (Amendment) Act, 2019):

To emphasize the time-bound nature of the process, the maximum period for completion of CIRP (including extensions and litigation period) was capped at 330 days. While this timeline is still often breached in practice due to various factors, its statutory backing provides a strong imperative for all stakeholders and adjudicating authorities to expedite matters.

Impact: It serves as a benchmark and a constant reminder to prevent undue delays, ensuring that the distressed asset does not suffer further value erosion.

Strengthening Information Utilities (IUs) (Ongoing Regulatory Amendments, e.g., IBBI (Information Utilities) Regulations):

IUs are central repositories of financial and operational debt information. Recent modifications have aimed to strengthen their role by making data submission by creditors more robust and verifiable. The objective is to reduce disputes over the existence and amount of default, thereby speeding up the admission of CIRP applications.

Impact: Improved data quality from IUs leads to quicker verification of claims, enhancing transparency and reducing initial litigation, which can significantly cut down the time for CIRP admission.

Amendments to IBBI (Insolvency Professionals) Regulations (Various amendments, including in 2024 and 2025):

These regulations govern the conduct, duties, and responsibilities of Insolvency Professionals (IPs). Recent amendments have focused on enhancing their accountability, ethical standards, and efficiency. This includes provisions allowing IPs to resign under certain conditions, clarifying the ability of Insolvency Professional Entities (IPEs) to utilize internal resources, and strengthening the Authorization for Assignment (AFA) framework.

Impact: Aims to improve the quality of insolvency professionals, ensuring they are competent, independent, and adhere to high ethical standards, which is crucial for the effective functioning of the IBC.

Relaxations and Specific Provisions for Real Estate Allottees (IBBI (CIRP) (Amendment) Regulations, 2025 (e.g., February 2025):

Building on the recognition of homebuyers as financial creditors, these regulations introduced specific provisions to address the unique challenges of real estate projects. Key changes include:

Handing Over Possession: The Resolution Professional, with CoC approval, can now hand over possession of plots/apartments to homebuyers even while the CIRP is ongoing, provided the allottee has fulfilled their obligations. This provides much-needed relief to homebuyers.

Appointment of Facilitators: Allows for the appointment of facilitators for sub-classes within large creditor classes like homebuyers, to improve communication and participation.

Participation of Competent Authorities: CoC can invite relevant land authorities (e.g., NOIDA, HUDA) to meetings for inputs on regulatory and development matters, which is crucial for real estate projects.

Reports on Development Rights: RPs are mandated to prepare detailed reports on development rights and approvals for real estate projects within 60 days, providing clarity on viability.

Relaxations for Homebuyer Associations: Empowered CoCs to relax conditions for associations of homebuyers to participate as resolution applicants.

Impact: These changes are designed to make real estate CIRPs more homebuyer-centric, efficient, and increase the likelihood of project completion and value preservation.

Enhanced Disclosure Requirements, especially for Avoidance Transactions (IBBI (CIRP) (Amendment) Regulations, 2025):

Recent amendments, particularly in the May 2025 regulations, mandate RPs to include comprehensive details of identified avoidance transactions (preferential, undervalued, fraudulent) in the Information Memorandum provided to potential resolution applicants.

Impact: This ensures greater transparency for prospective bidders, allowing them to make informed decisions about the corporate debtor's true financial position and potential liabilities/recoveries from such transactions. It also encourages more proactive identification and pursuit of these transactions.

Facilitating Part-Wise Resolution and Sale of Assets (IBBI (CIRP) (Fourth Amendment) Regulations, 2025 - May 2025):

This significant amendment allows Resolution Professionals, with CoC approval, to invite resolution plans not just for the corporate debtor as a whole, but also for specific business segments or for the sale of one or more of its assets. This creates a "dual-track" mechanism.

Impact: This provides greater flexibility, especially for large, diversified corporate debtors, allowing viable parts of the business to be resolved faster or sold off, preventing value erosion in healthy segments, and attracting a broader range of investors who might be interested only in specific assets or business units.

Harmonizing Payments for Dissenting Financial Creditors & Mandatory Presentation of All Plans (IBBI (CIRP) (Fourth Amendment) Regulations, 2025 - May 2025):

Dissenting Creditors: Where a resolution plan provides for staged payments, financial creditors who did not vote in Favor of the resolution plan must now be paid at least pro-rata and in priority over those who voted in Favor, at each stage. This ensures fairness and protects the rights of minority dissenting creditors.

All Plans to CoC: RPs are now mandated to present all resolution plans received to the CoC, including those that are non-compliant, along with details of non-compliance. Previously, RPs would often filter out non-compliant plans.

Impact: The dissenting creditor provision strengthens procedural justice and encourages more critical scrutiny within the CoC. The mandatory presentation of all plans increases transparency and empowers the CoC with complete information for their decision-making, reducing RP discretion and fostering a more competitive bidding environment.

These continuous modifications underscore the Indian government and the IBBI's commitment to making the IBC a more effective, efficient, and fair mechanism for resolving insolvency, adapting to the dynamic economic and legal landscape.

Further Action Plans to Make the Implementation More Effective

Enhancing Adjudication and Infrastructure:

Increase NCLT/NCLAT Bench Strength:

The single most critical bottleneck in IBC implementation is the overburdened National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT). A significant and sustained increase in the number of benches, judicial members, and technical members is paramount. This isn't just about filling existing vacancies but actively expanding the capacity to meet the growing caseload.

Action: This requires a dedicated recruitment drive, streamlined appointment processes, and adequate budgetary allocation. The government must treat NCLT/NCLAT expansion as a high priority infrastructure project.

Establish Dedicated IBC Benches:

Within the expanded NCLT/NCLAT, creating specialized benches solely dedicated to IBC matters, or even sub-specialized benches for complex areas like real estate, group insolvencies, or cross-border cases, can significantly improve efficiency. Judges and technical members on these benches would develop deeper expertise, leading to faster and more consistent decisions.

Action: This involves specific judicial training and allocation of personnel based on their aptitude and experience in commercial and insolvency law.

Digitization and Automation of Processes:

While some digitization has occurred, an end-to-end digital platform for all IBC proceedings is essential. This includes e-filing of applications, claims, and reports; online tracking of case progress; virtual hearings as a default; and AI-assisted tools for document review and basic compliance checks. Automation can reduce manual errors and processing times.

Action: This requires significant investment in IT infrastructure, robust cybersecurity measures, and training for all stakeholders (judges, lawyers, IPs, creditors) to fully utilize the digital system.

Strengthen IT Infrastructure for NCLT/NCLAT:

Beyond just digitizing processes, the physical and digital infrastructure of the NCLT/NCLAT must be robust. This includes high-speed internet, reliable video conferencing facilities in every courtroom, secure data storage, and adequate technical support staff. A poor digital backbone can negate the benefits of digitization.

Action: Regular audits of IT systems, procurement of modern equipment, and a dedicated IT support team for each bench.

Performance Metrics and Accountability for Adjudicating Authorities:

Implement clear, publicly available performance metrics for NCLT and NCLAT benches, focusing on case disposal rates, adherence to timelines, and consistency of judgments. While judicial independence is paramount, systematic data analysis can highlight areas of inefficiency. Introduce internal accountability mechanisms for delays not attributable to external factors.

Action: Regular data collection and publication by the Ministry of Corporate Affairs (MCA) and IBBI, with annual performance reviews and targeted interventions for underperforming benches.

Improving Resolution Process and Value Maximization:

Streamline Resolution Plan Approval:

The NCLT's role in approving resolution plans should primarily focus on ensuring compliance with the IBC's provisions and not delve into the commercial wisdom of the CoC. Develop clearer guidelines and precedents to limit the scope of judicial review during plan approval, preventing unnecessary litigation and delays.

Action: This requires strong judicial pronouncements from the Supreme Court reinforcing the "commercial wisdom" principle and NCLT/NCLAT training to adhere to this narrower scope of review.

Explore Out-of-Court Resolution Mechanisms:

While PPIRP is a step in this direction for MSMEs, explore and formalize other pre-insolvency or out-of-court restructuring and mediation frameworks for various corporate debtors. This could include a robust framework for voluntary liquidation or debt restructuring outside formal CIRP, reducing the burden on the NCLTs for cases that can be resolved amicably.

Action: Legislative amendments or separate regulations to recognize and enforce such agreements, providing legal certainty and encouraging early resolution.

Strengthen Enforcement of Resolution Plans:

Ensure that once a resolution plan is approved by the NCLT, its implementation is swift and strict. Introduce stronger provisions for penalizing non-compliance by the successful resolution applicant. This includes potential forfeitures of performance security and faster legal recourse for breaches.

Action: Amending the IBC to include specific enforcement mechanisms and dedicated NCLT benches for monitoring and ensuring compliance with approved plans.

Develop Sector-Specific Guidelines:

For complex sectors like real estate, infrastructure, financial services (e.g., NBFCs), and even startups, develop specific regulations or guidelines within the IBC framework. These guidelines would address unique challenges, such as handling a large number of homebuyers, regulatory approvals for infrastructure projects, or the going concern value of technology companies.

Action: IBBI, in consultation with sectoral regulators (e.g., RBI, SEBI, RERA), can issue detailed regulations or guidance notes.

Refine Valuation Standards and Practices:

Improve the quality, consistency, and reliability of valuations under the IBC. This involves developing more standardized valuation methodologies for distressed assets, enhancing the regulatory oversight of Registered Valuers (RVs), and providing continuous training to ensure high ethical standards and technical competence.

Action: IBBI can revise RV regulations, introduce mandatory continuous professional development, and impose stricter penalties for fraudulent or negligent valuations.

Facilitate Cross-Border Insolvency Framework:

Expedite the adoption and implementation of a comprehensive cross-border insolvency framework, ideally based on the UNCITRAL Model Law on Cross-Border Insolvency. This is crucial for Indian companies with assets or creditors abroad, ensuring cooperation with foreign jurisdictions and efficient resolution of multi-jurisdictional insolvencies.

Action: Parliament needs to pass the enabling legislation, and India needs to sign bilateral treaties or conventions with other countries to facilitate this.

Introduce Group Insolvency Framework:

The government's recent approval of a group insolvency framework is a positive step. This framework needs to be enacted into law and effectively implemented. It could provide mechanisms for coordinated resolution of financially linked companies within a corporate group, avoiding fragmented and inefficient proceedings.

Action: Timely enactment of the proposed Group Insolvency Bill and development of clear regulations by IBBI for its practical application.

Strengthening Stakeholder Capacity and Oversight:

Continuous Capacity Building for IPs and Stakeholders:

Conduct regular, advanced, and specialized training programs for Insolvency Professionals (IPs) covering complex legal, financial, and sector-specific issues. Extend these training initiatives to NCLT/NCLAT members, legal practitioners, and financial/operational creditors to enhance their understanding of the IBC and their respective roles.

Action: IBBI, in collaboration with professional institutes (e.g., ICAI, ICSI, IICA), should design and deliver these training modules.

Enhance Regulatory Oversight of IPs:

Strengthen the IBBI's surveillance and disciplinary mechanisms over IPs. This includes more proactive monitoring of their conduct, stricter enforcement of the Code of Conduct, swift action against professional misconduct, and greater transparency in disciplinary proceedings.

Action: Increased resources for IBBI's surveillance department, leveraging technology for monitoring, and clear guidelines for initiation and completion of disciplinary actions.

Promote Professional Code of Conduct for CoC:

While the CoC has commercial wisdom, a non-binding "Code of Conduct" or best practices guide for CoC members could encourage transparent, fair, and timely decision-making. This would address issues like internal squabbles, unreasonable demands, or lack of engagement, which often delay the process.

Action: IBBI could issue guidelines or advisories promoting responsible conduct and good governance practices within the CoC.

Strengthen Information Utilities:

Further mandate and incentivize the use of Information Utilities (IUs) for all financial and operational creditors. Ensure that data submitted to IUs is comprehensive, accurate, and regularly updated. Leverage technology to seamlessly integrate IU data with NCLT proceedings for automated verification of claims.

Action: Introduce stricter penalties for non-compliance in data submission, further enhance the data security and interoperability of IUs, and make IU records conclusive evidence for default.

Addressing Specific Gaps and Promoting Efficiency:

Clearer Guidelines on Avoidance Transactions:

Provide more precise statutory definitions and judicial precedents regarding preferential, undervalued, and fraudulent transactions. Develop detailed operational guidelines for Resolution Professionals on how to identify, investigate, and pursue avoidance applications more effectively and within stricter timelines.

Action: IBBI can issue detailed guidance notes, and judicial pronouncements from the Supreme Court can provide much-needed clarity.

Address Interplay with Other Laws:

Proactively harmonize the IBC with other potentially conflicting statutes, such as the Prevention of Money Laundering Act (PMLA), SEBI regulations, Income Tax Act, and RERA. This can be achieved through legislative amendments to clarify supremacy or through inter-regulatory coordination mechanisms.

Action: Formation of an inter-ministerial/regulatory committee to identify and resolve overlaps and conflicts, leading to necessary legislative changes.

Establish a Dedicated Fund for CIRP Costs:

In cases where the corporate debtor has minimal assets or funds, IPs often struggle to meet the initial CIRP costs, leading to delays or even abandonment of the process. Establishing a dedicated fund (perhaps from liquidation proceeds of other cases or government allocation) to cover initial CIRP costs in such cases could ensure the process does not halt due to lack of funds.

Action: Government can establish a corpus fund, with clear eligibility criteria and repayment mechanisms once assets are realized.

Post-Resolution Monitoring Mechanism:

Implement a robust mechanism to monitor the implementation of approved resolution plans and the performance of resolved companies for a defined period (e.g., 2-3 years) post-CIRP. This could involve periodic reporting requirements to IBBI or a designated agency, ensuring the successful revival and long-term compliance of the corporate debtor.

Action: IBBI to develop a reporting framework and conduct periodic reviews, possibly engaging independent auditors for this purpose.

These action plans, if implemented comprehensively and with sustained political will, have the potential to significantly enhance the effectiveness, efficiency, and fairness of the IBC regime in India, contributing to a healthier credit environment and improved ease of doing

Statistics at a Glance (as of Q1 FY25):

Total CIRP Cases Admitted: Over 8,002 cases since inception.

Cases Closed: Approximately 75% of admitted cases have been closed (resolution, withdrawal, liquidation).

Resolution vs. Liquidation: In FY24, a record 269 resolution plans were approved. The ratio of resolutions to liquidations improved from 21% (2017-18) to 61% (2023-24), though liquidations still account for 45% of closed CIRPs.

Recovery Rates: Average recovery for financial creditors is 32% of admitted claims. Against liquidation value, realization is higher (169%).

Time Taken: Average CIRP time for resolved cases in FY24 was 843 days, highlighting significant deviations from statutory timelines.

Behavioural Shift: Over 26,518 applications (₹9.33 lakh crore default) were withdrawn prior to admission (till Aug 2023), indicating the IBC's deterrent effect and encouraging pre-emptive settlements.

Conclusion:

The IBC, in its eight years, has significantly recalibrated India's credit ecosystem, fostering a culture of timely debt repayment and improving recovery rates. The constant amendments and regulatory fine-tuning reflect a commitment to continuous improvement. However, persistent challenges, particularly judicial backlogs and the need for deeper sectoral expertise, demand urgent and decisive action. By aggressively expanding judicial capacity, embracing end-to-end digitization, and enacting the proposed frameworks for group and cross-border insolvencies, India can propel the IBC into its next phase of maturity, ensuring it remains a powerful tool for economic stability and growth. The journey of the IBC is a testament to India's dynamic legal and economic reform agenda, steadily progressing towards a more efficient and effective insolvency regime.