IBC@10: Insolvency and bankruptcy code's administration needs improvement

The introduction of the Insolvency and Bankruptcy Code (IBC) 10 years ago is considered one of the biggest reforms of the past decade. It came at a time when the country was dealing with the twin balance-sheet problem. In a large market economy, it is natural to expect that some firms will fail. It is thus important that the legal framework facilitates easy entry, rescue, and exit of firms. This can help ensure economic dynamism, resulting in better utilisation of resources and ultimately leading to faster economic growth. While India opened up its economy with economic reforms starting in 1991, a smooth exit route for firms was missing. The available mechanisms to address corporate distress were inadequate. Thus, the IBC provided a modern framework to address insolvencies. The experience of the past decade clearly shows that outcomes have improved, though not to the desired level.

 

A study conducted by the Indian Institute of Management, Ahmedabad, covering 1,194 firms that underwent the resolution process till 2025, showed that their sales increased by about 90 per cent over five years post-resolution. Their capital expenditure increased by over 100 per cent, while expenses on employees went up by over 70 per cent. All these indicate that the IBC process helped revive the underlying business. According to the Insolvency and Bankruptcy Board of India data, as of March 2026, creditors have recovered ₹4.32 trillion under resolution plans. In about 1,300 cases where fair value was established, the recovery was over 94 per cent, while the creditor realised 166.85 per cent of the liquidation value. Realisation compared to admitted claims was predictably lower. Notably, over 40 per cent of the firms that yielded resolution plans were from the Board for Industrial and Financial Reconstruction or defunct, which reduced the average realised value. As the legacy insolvency cases get resolved, the average recovery would be expected to go up.

 

However, one area where the IBC has proved disappointing is the amount of time taken to resolve insolvency cases. The 1,419 cases that yielded resolution plans till March 2026, on average, took 621 days. In about 3,000 cases that ended in liquidation, it took, on average, 531 days to complete the process. The Code stipulates an early resolution within 330 days. The recent IBC (Amendment) Act, 2026, aims to strengthen the law and improve outcomes. For instance, the committee of creditors (CoC) will now supervise during the liquidation process, which will increase transparency and possibly realisation as well. The CoC will also have to record the reasons for approving the plan, which will again improve transparency and possibly reduce litigation at later stages. Further, the adjudicating authority will have to approve or reject the resolution plan in 30 days. In the case of a delay, it will have to record the reasons.

 

There are several such provisions. However, strengthening the law is only one aspect of improving outcomes, and, to the government’s credit, this has been done from time to time. The other aspect is capacity constraints. The National Company Law Tribunal and the National Company Law Appellate Tribunal, which were established to handle matters related to corporate law, are also handling insolvency cases. There is a case for improving capacity in these institutions to expedite the adjudication process under the IBC. Delays in the resolution beyond a point can destroy value in firms and defeat the very purpose of the law.