Insolvency Beyond Private Law: Recasting The Insolvency And Bankruptcy Code, 2016 As A Constitutional Instrument
Animesh Chaturvedi, NLIU Bhopal
Samragyee Roy, NLIU Bhopal
Riya Arya, NLIU Bhopal
The conventional characterisation of the Insolvency and Bankruptcy Code, 2016,1 as a purely economic or private law mechanism – designed to maximise value, ensure creditor coordination, and facilitate efficient exit – obscures a deeper structural transformation it effects within the Indian legal order. At its core, insolvency under the Code is not merely a forum for debt resolution; it is a site where pre-existing legal entitlements are forcibly reordered through a legislatively sanctioned process of collective discipline. This reordering is neither incidental nor purely procedural. It represents a conscious departure from the fragmented, enforcementdriven paradigm that traditionally governed creditor remedies, replacing it with a centralised regime that subordinates individual claims – irrespective of their origin – to the logic of resolution and finality. In doing so, the Code performs a function that is more accurately understood in constitutional rather than purely commercial terms. This reconceptualisation becomes evident when one examines the nature of the transformations the Code authorises. Outside insolvency, legal entitlements – whether arising from contract, statute, or sovereign authority – carry with them the full spectrum of enforcement rights recognised by the legal system. The initiation of insolvency proceedings disrupts this baseline by imposing a moratorium that suspends not only private enforcement but also, crucially, the exercise of statutory and coercive powers by the State. The effect is not merely to pause enforcement, but to subject all claims to a common institutional process in which their fate is collectively determined. The Code thus displaces the ordinary hierarchy of remedies with a new ordering principle:2 that no claimant, including the State, may unilaterally enforce its rights outside the insolvency framework.
