Insolvency & Bankruptcy Code (IBC) 2016 (Amendment Act 2026) (UPSC-RAS) (ECONOMY) CURRENT AFFAIRS

Administered ministry :-

Regulator:-

IBBI (Insolvency and Bankruptcy Board of India).
Main objective: "IBC introduced a unified, creditor-driven and time-bound mechanism for resolving financial distress — consolidating multiple overlapping frameworks into a single structure."

Data for answer enrichment-

94.56% -Recoveries as % of fair value under approved resolution plans
52.4% - Share of IBC in total bank NPA recoveries (2024-25) — highest among all recovery channels

IBC FRAMEWORK —

CIRP	Corporate Insolvency Resolution Process — structured mechanism for resolving corporate insolvency. Timeline: 180 days (extendable to 330 days). If unresolved → liquidation.
CoC	Committee of Creditors — comprising financial creditors. Evaluates resolution plans; makes commercial decisions about the future of the stressed entity. Core decision-making body under IBC.
IBBI	Insolvency and Bankruptcy Board of India — apex regulatory authority. Oversees IPs, IPAs, Information Utilities. Frames regulations and standards for the insolvency ecosystem.
IP	Insolvency Professional — appointed to administer the affairs of the distressed entity, safeguard assets, facilitate creditor meetings, and oversee the resolution process.
NCLT	National Company Law Tribunal — adjudicating authority for corporate insolvency matters. Admits or rejects CIRP applications; approves resolution plans.
NCLAT	National Company Law Appellate Tribunal — hears appeals against NCLT decisions in insolvency matters.

1. Faster admission — 14-day rule

Earlier: Delays in admission — unexplainedNow: Adjudicating Authority (NCLT) must decide applications within 14 days. If timeline missed, reasons must be formally recorded. Introduces judicial accountability at entry stage.

2. Withdrawal discipline

Earlier: Withdrawal possible at any stageNow: Withdrawal barred before CoC is constituted AND after resolution plans are invited. Prevents disruption at critical stages; protects stakeholder interests and sunk costs.

3. Stronger moratorium

Earlier: Gaps in moratorium — guarantees bypassed itNow: Moratorium explicitly applies to guarantee situations. Guarantees cannot be used to bypass insolvency process. Company gets a more secure resolution environment.

4. CoC role in liquidation

Earlier: CoC role ended after resolution stageNow: CoC role extended into liquidation stage. Can supervise conduct of liquidation; can even replace the liquidator if necessary. Ensures creditor oversight throughout the full lifecycle.

5. Guarantor assets included

Earlier: Only corporate debtor's assets in scopeNow: Assets of guarantors can be included in resolution process — subject to creditor approval and conditions. Widens asset pool; improves recovery especially in complex guarantee structures.

6. Fair treatment — dissenting creditors

Earlier: Dissenting creditors often felt unfairly treatedNow: Dissenting creditors guaranteed minimum of: liquidation value OR amount under resolution plan per Section 53 waterfall — whichever is lower. Reduces litigation; makes plans more acceptable.

7. New creditor-led process

Earlier: All insolvency required formal NCLT admission firstNow: New creditor-initiated insolvency resolution mechanism for specified categories of debtors — subject to threshold and procedural safeguards. Reduces dependency on formal admission; more responsive system.

8. Clearer definitions

New definitions for: "service provider" (IPs, IPAs, information utilities) · "security interest" (only contractual — not arising by operation of law) · "avoidance transactions" (preferential, undervalue, fraudulent) · "fraudulent or wrongful trading" under Section 66.

9. One-time restoration

Earlier: Once moved to liquidation, no going backNow: One-time restoration of resolution process allowed within defined timelines before liquidation is finalised. Viable businesses get an additional opportunity for revival.

10. Structured liquidation timelines

Earlier: Liquidation proceedings lacked clear timelinesNow: Structured timelines, clearer roles, improved supervision during liquidation. Even when resolution fails, exit process becomes faster and more orderly.

11. Avoidance transaction proceedings continue

Proceedings relating to avoidance transactions and fraudulent/wrongful trading can continue even AFTER completion of insolvency resolution or liquidation. Creditors/members can approach NCLT if RP or liquidator fails to report such transactions.

12. Phased resolution plan approval

Timeline breaches average resolution timelines in several cases exceeded the statutory limit of 330 days — defeating the time-bound objective of IBC. NCLT capacity constraints are the primary cause.
Prolonged litigation delays in adjudication and prolonged litigation (especially in Section 29A eligibility disputes) affected value maximisation. Multiple appeals to NCLAT and Supreme Court add years to cases.
Liquidation dominance of 8,987 CIRPs admitted, only 1,419 resolved through resolution plans — a significant proportion ended in liquidation, often recovering far less than resolution plans would have.
NCLT capacity insufficient NCLT benches and members remain the biggest infrastructure bottleneck. Judicial vacancies compound delays despite legislative improvements.
Individual insolvency personal insolvency (Part III of IBC) has not been effectively operationalised — only corporate insolvency has seen meaningful implementation.

Way forward :-

strengthen NCLT bench strength; fast-track operationalise personal insolvency (Part III); expand pre-packaged insolvency to large companies; build IP ecosystem quality; develop cross-border insolvency framework (UNCITRAL Model Law); reduce litigation by further legislative clarity.