The Insolvency and Bankruptcy Code, 2016 is a comprehensive law enacted by the Government of India to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner.
To provide a single framework for insolvency and bankruptcy proceedings.
To promote ease of doing business by enabling quicker debt resolution.
To maximize the value of assets of insolvent entities.
To balance the interests of all stakeholders, including creditors and debtors.
Time-bound process: Insolvency resolution process must be completed within 180 days (extendable by 90 days).
Corporate Insolvency Resolution Process (CIRP): Initiated when a default exceeds ₹1 crore (as per latest threshold).
National Company Law Tribunal (NCLT): Acts as the adjudicating authority for companies and LLPs.
Insolvency Professionals (IPs): Appointed to manage the debtor’s affairs during the resolution process.
Committee of Creditors (CoC): Formed by financial creditors to vote on the resolution plan.
Liquidation: If resolution fails, the company goes into liquidation and assets are distributed as per the waterfall mechanism.
Improved credit culture in India.
Faster and more transparent resolution mechanism.
Reduced burden on the judicial system by providing a specialized adjudicating authority.
Pre-pack insolvency introduced for MSMEs.
Threshold limits revised.
Empowerment of homebuyers as financial creditors.
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Enactment: Passed by Parliament in May 2016, enforced from December 2016.
Aim: Unified framework for insolvency resolution of individuals, partnership firms, and companies.
Insolvency: Inability to repay debts when due.
Bankruptcy: Legal status of a person declared insolvent.
Corporate Debtor: A company or LLP that owes a debt.
Creditor: Entity to whom debt is owed (Financial or Operational).
Resolution Plan: A plan proposed to revive the debtor.
Liquidation: Selling off of assets to pay debts.
Insolvency and Bankruptcy Board of India (IBBI): Regulator.
Adjudicating Authorities:
NCLT: For companies and LLPs.
DRT: For individuals and partnership firms.
Insolvency Professionals (IPs): Appointed to manage the process.
Information Utilities (IUs): Store financial information for evidence.
Trigger: Default of ?1 crore or more.
Process:
Initiation: By creditor or debtor.
Moratorium: Legal stay on recovery proceedings.
Appointment of IRP (Interim Resolution Professional).
Formation of Committee of Creditors (CoC).
Resolution Plan submission and approval (within 180–270 days).
If resolution fails → Liquidation Process begins.
Initiated if:
CoC rejects all plans.
No plan submitted in time.
NCLT rejects plan.
Liquidator appointed.
Assets sold off and distributed as per waterfall mechanism.
Similar time-bound process.
Handled by Debt Recovery Tribunal (DRT).
Covers personal guarantors and partnership firms.
Fast Track: For small companies, completed in 90 days.
Pre-Packaged Insolvency (Pre-Pack):
Introduced in 2021 for MSMEs.
Debtor-in-possession model with creditor oversight.
Part I – Preliminary (Definitions)
Part II – Corporate Insolvency
Part III – Insolvency of Individuals and Partnerships
Part IV – Regulation of IPs and Agencies
Schedules – Amendments to other Acts like Companies Act, SEBI Act
Faster resolutions and reduced NPAs.
Recovery rate improved.
Strengthened India’s position in Ease of Doing Business.
Delays beyond 270 days in many cases.
Burden on NCLT.
Behaviour of promoters and legal challenges.
| Commercial Insolvency & Bankruptcy Code |
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