India's Insolvency Revolution: A Decade under the Insolvency and Bankruptcy Code

India's Insolvency Revolution: A Decade of Progress and Challenges

India is at a critical juncture in its economic journey, with the country aspiring to become the world's third-largest economy. The strength and credibility of its legal and institutional infrastructure will be as important as the growth numbers themselves. One of the most significant developments of the past decade has been the transformation of India's insolvency and bankruptcy framework, marked by the Insolvency and Bankruptcy Code, 2016 (IBC).

From Chaos to Order

Ten years ago, India had no single, coherent law for dealing with corporate insolvencies. Creditors had to navigate a maze of civil courts, debt recovery tribunals, and winding-up proceedings that could stretch anywhere from six to ten years before a single rupee was recovered. By then, the company had lost most of its value, its employees had left, and whatever remained was worth a fraction of the original. The system, perversely, rewarded delay.

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The IBC changed all of that. It consolidated fragmented laws into a single framework, set time limits, created specialised tribunals, and empowered creditors. Most importantly, it changed the fundamental philosophy – from a liquidation mindset, where the goal was to break up a company and sell its pieces, to a rescue mindset, where the goal is to save the company as a going concern, preserve jobs, and maximise value for all stakeholders.

The Numbers Tell a Story

The progress made under the IBC is evident in the numbers. Recovery rates in scheduled commercial banks have approximately doubled – from 13.2% in FY2018 to 26.2% in 2025. In December 2025, S&P Global Ratings formally upgraded India's insolvency regime from "Group C" – their lowest category – to "Group B," noting that average recovery rates have improved from 15–20% under the old regime to approximately 30% under the IBC, and that resolution timelines have come down from six to eight years to about two years.

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As of December 2025, approximately 4,002 corporate debtors have been resolved under the IBC, with the value recovered in resolved cases yielding more than 171% of the liquidation value – meaning creditors are recovering significantly more through the resolution process than they would have through liquidation. Resolution plans are on average yielding around 95% of the fair value of the corporate debtor.

The Cases That Built the Law

The IBC did not arrive with all the answers. The Supreme Court has built the jurisprudence case by case. In Innoventive Industries v. ICICI Bank, the Court held a clear principle: to admit an insolvency petition by a financial creditor, the NCLT only needs to be satisfied that there is a debt and that the corporate debtor has defaulted. Nothing more. In Essar Steel, the Supreme Court upheld the primacy of commercial decision-making by the Committee of Creditors, holding that as long as the provisions of the IBC are followed, it is the commercial wisdom of the majority of the CoC that must prevail – courts will not second-guess business decisions.

The Challenges That Remain

Despite the progress, significant challenges persist. The law requires the entire resolution process to be completed within 330 days. The reality is that the average is now 853 days – more than double the legal limit. The NCLT's 30 benches currently carry a backlog of nearly 30,600 cases, with an estimated clearance time of close to ten years at current disposal rates.

The Opportunity Ahead

India's insolvency system is young – ten years old in legal terms. The institutions that support it – the NCLT, the IBBI, the insolvency professional community, and the insolvency bar – are all still being shaped and built. Compared to more mature jurisdictions, where early intervention mechanisms are available and pre-packaged plans can be approved in days, there is a considerable distance yet to travel.

But the trajectory is unmistakable. A system that once rewarded delay and destroyed value has been transformed into one that is increasingly recognised – by global rating agencies and the market alike – as a credible, functioning framework. The task now is to close the remaining gap: to build the culture, the standards, and the habits of a profession worthy of the system it serves.

Conclusion

The IBC's first decade has demonstrated that institutional reform, when designed with clarity of purpose and backed by a determined judiciary and legislature, can produce measurable results. Recovery rates have doubled. Resolution timelines have fallen sharply. India has earned a place on the global insolvency map. But the work is far from complete. Delays that stretch to twice the statutory limit, judicial uncertainty on core questions, and an overburdened tribunal system are not merely operational challenges – they are threats to the credibility of the framework itself. The pending Amendment Bill offers an opportunity to correct course legislatively. The more enduring task, however, is cultural: building a profession and a set of institutions whose conduct, standards, and judgement are equal to the ambitions of the law they serve.