10 years of Insolvency and Bankruptcy Code: Battling the delays

Before 2016, India was a defaulter’s paradise: a company could simply stop paying its debts, and the system would slow down to accommodate it. Several laws applied, among them the Sick Industrial Companies Act, the Companies Act and the debt recovery tribunal framework, each with its own forum, procedure and delays. A lender trying to recover money from a defaulting company could spend years navigating this maze. By the time a resolution was reached, the assets had rusted, the enterprise value had evaporated, and the creditor was left with a fraction of what it was owed. The average recovery was 15 to 20 paise on the rupee, and a case could take six to eight years. This was not a system designed to resolve distress; it was a system designed to postpone it. As the old adage goes, “justice delayed is justice denied.”

After years of such frustration, the Insolvency and Bankruptcy Code (IBC) arrived.

A radical consolidation

When Parliament passed the IBC in 2016, it did something fundamental. It consolidated a scattered framework into a single law. It shifted control from the debtor to the creditor. It imposed strict timelines. It also created a new institutional architecture: the Insolvency and Bankruptcy Board of India, insolvency professionals, information utilities, and the National Company Law Tribunal (NCLT) as the adjudicating authority.

The promise was simple: resolve distress quickly, or liquidate cleanly. Maximise value. Promote entrepreneurship. Above all, change the culture of borrowing and lending.

What the Code delivered

Ten years on, the scorecard is mixed, and the Code remains a work in progress. Even so, the Ministry of Corporate Affairs (MCA) and the Press Information Bureau (PIB) cites that it has rescued 4,099 companies, about 58 per cent of closed cases, which is a substantial measure of success. Creditors have realised more than ₹4 lakh crore through approved resolution plans. That amounts to 95 per cent of the fair value of those companies and 167 per cent of their liquidation value.

In plain terms, resolution has delivered far more than liquidation would have. Official Press release of PIB further states that the recovery rates have roughly doubled, from 15-20 per cent before the IBC to around 30 per cent now. The banking sector’s gross non-performing asset ratio has fallen from 11.8 per cent in 2017 to 2.1 per cent as of September 2025. S&P Global has upgraded India’s insolvency framework from “Group C” to “Group B”, and the Reserve Bank of India’s own report identifies the IBC as the most effective mechanism for recovering stressed assets.

Perhaps the most significant achievement is the least visible. More than 30,000 cases were resolved at the pre-admission stage, with debtors settling with creditors before the insolvency process even began. The amount involved was nearly ₹14 lakh crore. The IBC’s true power lies not in what happens inside the tribunal, but in the threat of the tribunal, which compels debtors to pay outside it.

Where the Code is faltering

The picture, however, is not uniformly bright. Recoveries against admitted claims fell sharply in FY 2025–26, from 46 per cent the previous year to just 23 per cent. The average haircut for lenders stood at 68 per cent. Resolution timelines have worsened rather than improved: the average case now takes 744 days, nearly three times the statutory limit of 270 days, and about 78 per cent of ongoing cases have crossed that threshold.

The NCLT has a sanctioned strength of 63 members, but only 54 are in position. The Supreme Court itself took suo motu cognisance of the “grim situation”, noting that 383 resolution plans were awaiting approval, with delays ranging from 48 to 738 days.

The 2026 amendment and its limits

The 2026 Amendment Act attempts to address these failures. It requires tribunals to admit or reject insolvency applications within 14 days. It introduces a creditor-initiated insolvency resolution process, allowing out-of-court resolution in specified cases. It tightens liquidation timelines to 180 days, with only limited scope for extension. It removes the bar on a resolution professional acting as liquidator, allows the Committee of Creditors to supervise liquidation, and provides for group and cross-border insolvency frameworks.

These are structural reforms, and they are necessary. But they will work only if the tribunals have the manpower and infrastructure to implement them.

An unfinished promise

The IBC was never meant to be a mere recovery machine. Its purpose was to rescue viable businesses and liquidate unviable ones, and it has done both. It has changed the behaviour of borrowers, given creditors a seat at the table, created a profession of insolvency practitioners, and made India a more attractive destination for credit.

Yet delays are eroding its credibility. A creditor who waits three years for a resolution that yields 30 per cent of admitted claims will think twice before lending again. The Code’s deterrent value depends on its speed. If the process becomes as slow as the system it replaced, the old culture will return with it: the one Yudhishthira’s answer described, of watching others fail while believing oneself exempt.

The next decade must be about execution, not legislation. The amendments are in place, and the framework is sound. What is needed now is judicial capacity: more NCLT benches, more members and better infrastructure. The Code never promised that every case would be resolved quickly. It promised that the system would try. A decade in, the effort is visible, and so are the results. But so are the delays. The promise is not broken; it is yet to be finished.

Vinay Juneja is Assistant Professor (Law) and Course Director PG-MBA at Maharashtra National Law University (MNLU), Mumbai. He also serves as visiting faculty at National Institute of Securities Market (NISM). Adhiraj Sahgal is managing editor at NUSRL Law Review, the academic journal of the National University of Study and Research in Law, Ranchi.