India’s Insolvency Framework

1. At a Glance

Insolvency & Bankruptcy Code (IBC), 2016 — India's unified, creditor-driven, time-bound law for resolving financial distress of corporates, partnerships and individuals [S1].
Replaced a fragmented regime (SICA, RDDBFI, SARFAESI, Companies Act provisions) with a single waterfall mechanism; recoveries of ₹4.32 lakh crore till March 2026 through approved resolution plans [S1].
Key for UPSC: GS-II (statutory bodies, legislation) and GS-III (banking, NPAs, ease of doing business).

Insolvency and Bankruptcy Code (Amendment) Act, 2026 received Presidential assent on 6 April 2026, introducing Creditor-Initiated Insolvency Resolution Process (CIIRP), Group Insolvency framework, and strict NCLT timelines [S1][S2].
PIB Backgrounder (28 May 2026) titled "From Financial Distress to Structured Resolution" released to explain the reforms [S1].

Pre-2016: Recovery handled via SICA 1985, RDDBFI Act 1993 (DRTs), SARFAESI Act 2002, BIFR — average resolution took 4.3 years (World Bank Doing Business) [S3].
2014: Bankruptcy Law Reforms Committee (BLRC) under T.K. Viswanathan constituted by Ministry of Finance [S3].
28 May 2016: IBC enacted; IBBI established 1 October 2016 [S4].
Subsequent amendments: 2018 (homebuyers as financial creditors), 2019 (330-day outer limit), 2020 (COVID-19 Section 10A suspension), 2021 (Pre-Packaged Insolvency for MSMEs), 2026 (latest) [S1][S2].

Parent Ministry: Ministry of Corporate Affairs (MCA) [S1].
Regulator: Insolvency and Bankruptcy Board of India (IBBI) — statutory body under Sec. 188 of IBC [S4].
Adjudicating Authorities:
NCLT — for corporates / LLPs.
DRT — for individuals & partnership firms [S1].
Appellate: NCLAT → Supreme Court.
4 Pillars of IBC: (i) IBBI, (ii) Insolvency Professionals & IPAs, (iii) Information Utilities, (iv) Adjudicating Authorities [S4].
CIRP Timelines: 180 days + 90 days extension; outer limit 330 days including litigation [S3].
Default threshold: raised from ₹1 lakh to ₹1 crore (24 March 2020 notification) [S3].
Performance (March 2026): 8,987 CIRPs admitted; 1,419 resolved; realisation 116.85% of liquidation value, 94.56% of fair value [S5].

IBC recoveries contributed ₹46,340 crore (48.1%) of total SCB recoveries of ₹96,325 crore in FY24 — the single largest recovery channel ahead of SARFAESI and DRTs [S6].
Improved India's Resolving Insolvency rank in erstwhile World Bank Doing Business; signalling effect on credit discipline [S3].

Enacted under Entry 9 (Bankruptcy & Insolvency), Concurrent List; upheld in Swiss Ribbons v. Union of India (2019) — SC affirmed constitutionality and creditor-in-control philosophy [S3].
Section 29A bars wilful defaulters and connected persons from bidding.

Delays at NCLT — 71% of ongoing CIRPs exceeded 270 days (IBBI data) prompted 2026 reforms: 14-day mandatory admission, 30-day plan approval windows [S2].
Pendency due to limited NCLT benches; capacity augmentation underway [S5].

Committee of Creditors (CoC) holds commercial wisdom (recognised in K. Sashidhar and Essar Steel judgments).
2026 Act permits CoC to replace liquidator by 66% vote; introduces service provider, avoidance transaction, fraudulent/wrongful trading definitions [S2].

June 2025: RBI Financial Stability Report flags IBC as principal stressed-asset resolution channel [S7].
March 2026: Cumulative realisation crosses ₹4.32 lakh crore [S1].
6 April 2026: IBC (Amendment) Act, 2026 receives Presidential assent — introduces CIIRP (Chap IV-A, Sec 58A–58K) and Group Insolvency (Chap V-A, Sec 59A) [S2].
28 May 2026: PIB Backgrounder released [S1].

IBC enacted in 2016; based on report of BLRC chaired by T.K. Viswanathan [S3].
IBBI established on 1 October 2016; HQ New Delhi; regulator under MCA [S4].
Adjudicating authority for corporates: NCLT (not DRT) [S1].
Default threshold for CIRP initiation: ₹1 crore (since March 2020) [S3].
Outer time limit for CIRP: 330 days [S3].
Section 29A — disqualification of resolution applicants [S3].
Pre-Packaged Insolvency Resolution Process (PPIRP) available only to MSMEs (2021 amendment) [S3].
Section 10A — suspended fresh CIRPs during COVID (March 2020 – March 2021) [S3].
IBC contribution to SCB recovery FY24: 48.1% (₹46,340 cr) [S6].
2026 Amendment: NCLT must admit within 14 days; approve plan within 30 days [S2].
CoC supermajority to replace liquidator: 66% [S2].
Bankruptcy & Insolvency falls under Concurrent List, Entry 9 [S3].
Total CIRPs admitted till March 2026: 8,987; resolved: 1,419 [S5].

GS-III: Indian Economy — Mobilization of resources, banking sector NPAs.
GS-II: Statutory bodies (IBBI), legislation in Parliament.
Probable question stems: 1. "The IBC, 2016 has shifted India from a debtor-in-possession to a creditor-in-control regime. Critically evaluate its performance after a decade." 2. "Examine the rationale for the Creditor-Initiated Insolvency Resolution Process and Group Insolvency framework introduced by the IBC (Amendment) Act, 2026." 3. "Despite procedural reforms, NCLT pendency continues to undermine the time-bound philosophy of the IBC. Discuss."

SARFAESI Act 2002 — alternative recovery channel.
DRT / DRAT — under RDDBFI Act 1993.
NCLT & NCLAT — Companies Act 2013 tribunals.
RBI Prudential Framework for Stressed Assets (June 2019) — pre-IBC restructuring.
Bad Bank / NARCL — complementary resolution mechanism.
PCA Framework & AQR — NPA recognition history.
Cross-border insolvency / UNCITRAL Model Law — proposed Part Z of IBC.
MSME Pre-Pack (PPIRP) — Chapter III-A.

IBBI ≠ SEBI/RBI — IBBI is under Ministry of Corporate Affairs, not Finance.
NCLT for corporates, DRT for individuals — commonly reversed.
IBC default threshold is ₹1 crore (not ₹1 lakh) since March 2020.
PPIRP is MSME-exclusive, not for all corporates.
BLRC was chaired by T.K. Viswanathan, not Y.V. Reddy or Bimal Jalan.
The 330-day limit includes litigation time (post-2019 amendment) — not just 270 days.

[S1] India's Insolvency Framework — PIB Backgrounder — https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=158704&ModuleId=3&reg=3&lang=1 — (tier 1)
[S2] IBC (Amendment) Act 2026 — PIB / PRS coverage — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2266139 — (tier 1)
[S3] IBBI amends CIRP Regulations / IBC framework background — https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1609290 — (tier 1)
[S4] IBBI Eighth Annual Day — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2060974 — (tier 1)
[S5] IBC Boosts Ease of Doing Business; 1,194 resolved, ₹3.89 lakh cr realised — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2157539 — (tier 1)
[S6] Resolution of Stressed Assets and IBC — RBI Speech — https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/STRESSEDASSETS89E42FCA2E0F4267B95973064899A1F0.PDF — (tier 1)
[S7] RBI Financial Stability Report, June 2025 — https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/0FSRJUNE20253006258AE798B4484642AD861CC35BC2CB3D8E.PDF — (tier 1)