From Ambiguity to Accountability: An Analysis of India’s IBC, 2016

Written by: Mallika Chadha, B.A.LL.B( 4^th Year ) , Lovely Professional University

Abstract

The Insolvency and Bankruptcy Code, 2016 (IBC)[1] represents one of the most significant legal, economic, and institutional transformations in India’s post-liberalization history. Prior to its enactment, India’s insolvency regime was disjointed, heavily procedural, and economically stagnant. The multiplicity of overlapping legislations had resulted in a fragmented legal architecture that hindered business revival and creditor confidence. The introduction of the IBC was therefore not merely legislative reform—it was a structural shift designed to restore economic efficiency, improve credit discipline, and consolidate India’s insolvency ecosystem under a single, time-bound, and creditor-centric framework. The IBC aimed to ensure that insolvency is not perceived as a terminal failure but as a structured opportunity for economic renewal.

The Code was conceptualized in response to the alarming surge in non-performing assets (NPAs) and the visible collapse of faith in India’s earlier insolvency and debt recovery mechanisms. Statutes such as the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI), and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) operated in isolation and lacked coordination, resulting in delayed recoveries and substantial value erosion. By introducing a consolidated mechanism under the Insolvency and Bankruptcy Board of India (IBBI) and the National Company Law Tribunal (NCLT), the IBC revolutionized the process of corporate insolvency, embedding predictability, accountability, and professionalism into its structure.

Empirical evidence since 2016 reflects this transformation. According to the IBBI Annual Report (2023–24), India’s average recovery rate improved from 26% before the Code to nearly 45%, while the average resolution period reduced from over four years to less than two. The World Bank’s “Ease of Doing Business” report (2020)[2] recorded India’s leap from 136th to 52nd position in resolving insolvency within four years of IBC’s enforcement. These improvements underscore the Code’s operational success in creating a credible, efficient, and internationally recognised insolvency framework. However, persistent judicial delays, unequal creditor treatment, and institutional capacity issues continue to test its robustness.

This paper undertakes a critical analysis of the socio-economic and legislative imperatives that led to the enactment of the IBC, examining how it addressed historical inefficiencies and what tangible good it has achieved. Drawing from doctrinal, empirical, and comparative methodologies, the paper also explores the IBC’s evolving jurisprudence, its interface with judicial interpretations, and the way forward for sustaining its long-term efficacy. The IBC, while transformative, remains a dynamic legal instrument—one that continues to evolve with India’s changing economic and institutional landscape.

Keywords: Insolvency and Bankruptcy Code (IBC), Non-Performing Assets (NPAs), Corporate Insolvency Resolution Process (CIRP), Creditor Primacy, Economic Reform, Judicial Efficiency.

[1] The Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (2016).

[2] World Bank, Doing Business 2020: Comparing Business Regulation in 190 Economies (2020).

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Volume 2 | Issue 1