The Insolvency and Bankruptcy Code 2016 is a major step towards innovative and time-bound
India has ushered in a new era of doing business with the historic jump of 30 positions to the 100th
rank among 190 countries in the recently-released Doing Business Report of the World Bank. This
huge improvement can be attributed to rigorous legislative overhauling, coupled with regulatory and
infrastructural reforms. One of the many indicators where India made massive strides is ‘Resolving
Insolvency’, where it witnessed a record leap of 33 ranks, helping it attain the 103rd rank in this
parameter. This drastic improvement is an outcome of the implementation of the landmark
Insolvency and Bankruptcy Code (IBC) 2016, which has greatly simplified insolvency proceedings and
facilitated the fast-tracking of processes for stakeholders, including creditors, investors and debtors,
in the country. The Code provides for a uniform and comprehensive insolvency legislation.
The main emphasis of the Code is to shift the focus from a debtor-in-possession to a creditor-in-
control regime. The creditor driven nature of the Code is validated by the fact that it mandates the
implementation of the resolution plan approved by 75% of the members of the Committee of
Creditors (CoC) for the revival or liquidation of the company in consideration within a period of 180
days (subject to a one-time extension by 90 days). The Code, therefore, aims to boost the confidence
of the lenders by putting in place a streamlined process for insolvency resolution to ensure that the
business functions of a company that is going insolvent are not interrupted. All these measures
together target reducing the time taken to resolve insolvency, maximizing the value of assets, and
enhancing investor sentiment.
Since its implementation in May 2016, the IBC has effectively addressed the issue of bad loans and
Non-Performing Assets (NPAs) through its robust framework. Mr Injeti Srinivas, Secretary, Ministry
of Corporate Affairs, speaking at the National Conference on Resolving Insolvency, organized by CII
in partnership with the Ministry and the Insolvency and Bankruptcy Board of India (IBBI) on 4 April in
New Delhi, stated that “less than half of the staggering `9 lakh crores worth of NPAs or bad loans
accumulated by the banks has returned due to the system set in place by the IBC.”
The success of the Code can also be testified by the fact that out of the 650 corporate cases
admitted for resolution, 90 have already exited via the resolution or liquidation routes, and around
60 have been closed after reviews, informed Dr M S Sahoo, Chairman, IBBI, at the conference.
To sustain the momentum of the on-going insolvency reforms, the Ministry of Corporate Affairs
constituted a full-fledged Insolvency Law Committee, chaired by Mr. Injeti Srinivas, to analyze the
implementation of the Code, identify the bottlenecks, and suggest amendments. The Committee has
recently submitted a comprehensive set of recommendations which aim to further simplify
insolvency proceedings by hastening the decision-making process by creditors, addressing the
problems associated with real estate, and increasing the pool of potential bidders.
Some of the key recommendations of the Committee include:
- Allow the Central Government to exempt MSMEs from select provisions of the Code. For
instance, permit the promoters of MSMEs, who are not wilful defaulters, to bid for their
companies by submitting the resolution plan.
- Treat home-buyers as financial creditors to enable them to equitably initiate the insolvency
- Restrict the scope of the moratorium to the assets of the corporate debtor only, and not the
- To help expedite the resolution procedure, recalibrate the threshold of voting percentage
for various critical decisions to be undertaken by the CoC.
- Empower the NCLT to expand the scope of essential goods and services beyond what is
specified in the CIRP Regulations in reference to the Interim Resolution Professional (IRP) /
Resolution Professional (RP).
- Allow withdrawal of an application for CIRP postadmission in exceptional circumstances,
provided the CoC approves such action by 90% of voting share. This will facilitate the
functioning of the corporate debtor as a going concern.
The Committee also proposed developing an adequate legal framework to deal with cross-border
insolvency based on the UNCITRAL model law on cross-border insolvency, to further strengthen the
In sum, the IBC 2016 is a major step towards innovative and time-bound insolvency resolution. With
growing attempts for resolution of the issues involved in its transition, the Code is all set to provide
great relief to the stakeholders involved in cases pertaining to insolvency, which will also help
sustain the momentum of improvement in resolving the insolvency index of the Ease of Doing