As we reflect on the Insolvency and Bankruptcy Code, 2016 (IBC) entering its tenth year, the IBC has undeniably reshaped India’s credit landscape. Recoveries through IBC accounted for 48 per cent of bank recoveries in FY24.

Yet, frailties in the adjudication process and professional oversight have stalled progress. Drawing on the recently enforced Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Amendment Act), Report of the Select Committee on the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 and IBBI’s evolving regulatory framework, we propose practical, actionable measures to recalibrate the IBC for sustained economic momentum. These suggestions aim not merely to patch gaps but to fortify the Code’s core tenets: time-bound resolution, creditor primacy, and value maximization.

Easing the NCLT bottleneck

A significant challenge for the IBC is the time it takes for cases to be admitted and resolved. This delay can undermine the effectiveness of the resolution process.

The Amendment Act provides for several measures to address this. It calls for a 14-day timeline for the NCLT to pass orders on admission applications, requiring written reasons if this timeframe is not met. A key change is the mandate to treat records from an Information Utility as sufficient proof of a default. This would streamline the admission process by reducing the NCLT’s need to make discretionary judgments at this initial stage, a practice that gained some traction following the Supreme Court’s decision in the Vidarbha Industries case.

Further, to discourage tactical litigation, the Act also introduces Section 64A, which allows for significant penalties, up to ₹2 crore, for filing proceedings without a valid basis.

To support the NCLT, the Select Committee has recommended creating additional benches and specialised fast-track courts for high-value cases. On the technology front, the Integrated Platform for Insolvency and Enforcement (iPIE) aims to connect all stakeholders in a single digital environment, which could help automate parts of the pre-admission review and improve timeline tracking. While these reforms are well-designed, their success depends heavily on the system’s capacity to implement them.

A key issue is the shortage of judicial members and benches. It is concerning that the Ministry of Corporate Affairs confirmed in March 2025 that there is currently no proposal to increase the number of NCLT benches. This disconnect between the legal timelines and the existing institutional infrastructure suggests that without a significant increase in judicial appointments and resources, the delays are likely to persist.

Furthermore, the complexity of certain sectors demands specialisation. Real estate insolvencies, which account for 21 per cent of admissions and involve thousands of homebuyer-creditors, operate on fundamentally different economic logic than manufacturing or services. The establishment of dedicated Real Estate Benches at the NCLT, staffed by members with expertise in project development and RERA laws, is critical to standardising the “project-wise” resolution approach and preventing these heavy cases from clogging the general docket.

Focusing on value preservation

The decline in the IBC’s average recovery rate, from 43 per cent in Q1 FY20 to 31.4 per cent in Q3 FY25, points to an underlying issue of value erosion during the insolvency process. The reforms seek to counter this by encouraging resolutions outside the formal court process and improving safeguards for cases that are admitted.

A key feature of the Amendment Act is the introduction of a creditor-initiated out-of-court resolution process (CIIRP). This mechanism allows financial creditors who hold a majority of the debt to negotiate a binding restructuring plan directly with the debtor, without immediately involving the NCLT.

This approach, similar to “pre-packaged” resolutions, could help many businesses resolve their financial issues more quickly, preserving the value of the business as a going concern. For cases that do enter the formal process, the Act suggests a dedicated monitoring committee to oversee the implementation of the approved resolution plan. This committee would have the authority to initiate liquidation if the plan is not followed, filling an important enforcement gap.

Additionally, IBBI is considering valuation reforms that would encourage a broader assessment of a company’s worth, including its enterprise and synergistic value, not just its physical assets.

However, the effectiveness of these out-of-court options is closely linked to the efficiency of the formal IBC process. The incentive for a debtor to agree to an out-of-court settlement is weaker if the alternative is a slow and lengthy court procedure. The limited use of the pre-packaged insolvency framework for MSMEs, with only a handful of cases admitted since its introduction, shows that creating a legal mechanism does not automatically lead to its widespread adoption. The central challenge remains that the longer a company is in a state of uncertainty, the more its value diminishes. Until the timelines within the formal system are improved, it will be difficult to achieve higher recovery rates.

Ensuring accountability and capacity

Insolvency Professionals (IPs) are central figures in the IBC process, and their performance directly impacts outcomes. Recent discussions have focused on challenges related to professional conduct and the management of heavy caseloads. In response, reforms are being introduced to strengthen regulation and accountability.

The IBBI (Insolvency Professionals) (Second Amendment) Regulations, 2025, will set a limit on the number of cases an IP can handle at one time: 10 for individuals. This is intended to prevent IPs from taking on more work than they can manage effectively, ensuring each case receives adequate attention. The Select Committee has also suggested consolidating the various Insolvency Professional Agencies (IPAs) into a single regulatory body. This would help standardise training, ethical codes, and disciplinary procedures.

A system of performance-linked fees is also being considered to reward IPs for timely and successful resolutions, alongside increased penalties for misconduct. While the NCLAT has previously struck down “success fees” as speculative in the absence of explicit regulation, codifying these incentives would provide the necessary legal backing. This ensures that the IP is financially invested in securing the highest possible bid, rather than merely overseeing a procedural liquidation.

While these measures are important for improving the quality of professional services, they do not address the limited number of available IPs. This limited pool of professionals may struggle to meet the demands of the system, especially as the number of cases grows. Placing caps on assignments is a sensible step for quality control, but it needs to be paired with efforts to attract and train more professionals. Without a larger pool of qualified IPs, the system may face new constraints, even with improved regulatory standards.

Moving towards greater efficacy

The IBC has been a resilient framework over its first decade, and its continued evolution is key to its future success. The Amendment Act provides a clear path forward but does not do enough. The introduction of frameworks for group and cross-border insolvency is a particularly important development, as it will allow the Code to better address the complex structures of modern businesses and help in recovering assets held in other countries.

Ultimately, however, the success of any reform will depend on its implementation. A well-drafted law can only be effective if the institutions responsible for applying it are properly resourced.

The writers are Advocates at Madras High Court

Published on April 28, 2026