IBC: Insolvency and Bankruptcy Code

Imagine a hospital emergency room with no time limit on how long a patient can wait for treatment, versus one with a strict target that every case must be assessed and a treatment plan decided within a fixed number of days. Before 2016, resolving a genuinely bankrupt Indian company was closer to the first scenario, cases dragging on in multiple overlapping legal forums for years, sometimes over a decade, with asset value eroding the entire time.

The Insolvency and Bankruptcy Code, enacted in 2016, consolidated India's fragmented insolvency laws into a single, unified process with an explicit target timeline, originally 180 days extendable to 270, later further extended to 330 days including litigation, for a case to move from admission to resolution. A defaulting company enters the Corporate Insolvency Resolution Process, control passes to a court-appointed Resolution Professional, and creditors vote on whether to accept a resolution plan, restructuring and reviving the company, or move to liquidation if no viable plan emerges.

The Code deliberately shifted power from debtor to creditor compared to India's earlier regime, once insolvency proceedings begin, existing management typically loses operational control, a genuine behavioural change from a system where a defaulting promoter had previously retained significant leverage over the process for years while creditors waited.

IBC and SARFAESI serve genuinely different, complementary purposes, SARFAESI lets a secured lender seize specific collateral quickly outside court, while IBC handles the comprehensive, whole-company resolution process when a company itself, not just one specific secured loan, needs to be either revived or wound down under formal creditor oversight.

Whenever a stressed company is described as being taken to the NCLT, the National Company Law Tribunal, that is IBC's resolution process being formally triggered, and the eventual outcome, revival under new ownership or liquidation, is decided through the structured timeline and creditor-driven voting process the Code specifically created to replace India's earlier, far slower system.