Insolvency and Bankruptcy Code, 2016

The Insolvency and Bankruptcy Code, 2016 (IBC) is the principal legislation governing insolvency resolution, liquidation, and bankruptcy proceedings for companies, limited liability partnerships, partnership firms, and individuals in India. Enacted by the Parliament of India and coming into force on 28 May 2016, the Code consolidated and replaced multiple fragmented insolvency laws with a unified, time-bound framework for resolving financial distress. Administered by the Ministry of Corporate Affairs, the IBC seeks to maximize the value of distressed assets, promote entrepreneurship, improve credit availability, balance the interests of stakeholders, and enhance the ease of doing business in India. It represents one of the most significant economic and legal reforms undertaken in the Indian corporate and financial sectors.

The Insolvency and Bankruptcy Code establishes a structured process for resolving insolvency involving corporate debtors through the Corporate Insolvency Resolution Process (CIRP), while also providing mechanisms for liquidation, voluntary liquidation, pre-packaged insolvency resolution, and bankruptcy of individuals and partnership firms. Under the Code, financial creditors, operational creditors, and corporate debtors may initiate insolvency proceedings before the National Company Law Tribunal (NCLT), which serves as the adjudicating authority for corporate insolvency matters. Upon admission of an application, an interim resolution professional is appointed, a moratorium on legal proceedings comes into effect, and a Committee of Creditors (CoC) is constituted to evaluate and approve a resolution plan or, where resolution is not feasible, proceed with liquidation. Appeals against decisions of the NCLT lie before the National Company Law Appellate Tribunal (NCLAT) and, on questions of law, before the Supreme Court of India.

The regulatory framework established under the IBC is administered by the Insolvency and Bankruptcy Board of India (IBBI), which regulates insolvency professionals, insolvency professional agencies, and information utilities while issuing regulations governing insolvency and liquidation proceedings. The Code introduced strict statutory timelines for insolvency resolution, strengthened creditor rights, improved corporate governance during financial distress, and facilitated market-driven restructuring through competitive resolution plans. It has also been amended to introduce pre-packaged insolvency mechanisms, clarify the treatment of homebuyers and financial creditors, strengthen cross-border insolvency provisions under consideration, and improve the efficiency of insolvency proceedings through judicial and legislative reforms.

The Insolvency and Bankruptcy Code works alongside institutions including the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT), the Insolvency and Bankruptcy Board of India (IBBI), the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Competition Commission of India (CCI), and the Ministry of Corporate Affairs. By replacing earlier mechanisms such as the Board for Industrial and Financial Reconstruction (BIFR) and modernizing India's insolvency regime, the IBC has significantly strengthened creditor confidence, improved the resolution of distressed assets, enhanced financial discipline, and contributed to the development of a more efficient and predictable corporate insolvency framework.