Insolvency and Bankruptcy Code (IBC)

The Insolvency and Bankruptcy Code (IBC), 2016 is India's comprehensive legislation that provides a time-bound, unified legal framework for the resolution of insolvency of companies, limited liability partnerships, firms, and individuals — consolidating previously fragmented laws governing debt recovery, winding up, and financial restructuring into a single coherent framework. Before IBC, the resolution of corporate insolvency in India was slow, fragmented across multiple forums (BIFR, DRT, High Courts), and heavily tilted in favour of promoters who could delay proceedings indefinitely — leading to large, irrecoverable NPAs in the banking system. IBC established the National Company Law Tribunal (NCLT) as the adjudicating authority, with a 180-day resolution timeline (extendable to 330 days) and a creditor-in-control framework that replaces the debtor-in-possession model. The code has transformed India's credit culture — the Supreme Court's landmark Essar Steel judgment (2019) and subsequent resolution of large stressed assets in steel (Bhushan Steel acquired by Tata Steel), power, and telecom sectors demonstrated IBC's effectiveness. India's ranking on World Bank's Ease of Resolving Insolvency improved significantly post-IBC implementation. For equity investors, IBC fundamentally changed the risk calculus for investing in highly leveraged companies — the credible threat of IBC proceedings has improved promoter behaviour and debt discipline across Indian corporate India.