Is The Insolvency And Bankruptcy Code, 2016, An Effective Resolution Tool?
- IJLLR Journal
- Jul 22
- 1 min read
Monika Pandey, LLM, Himachal Pradesh National Law University, Shimla
I. Introduction: The Genesis and Objectives of India's Insolvency Reform
India's economic landscape, prior to 2016, was characterized by a convoluted and inefficient insolvency framework that significantly hampered credit recovery and business continuity. The pre-Insolvency and Bankruptcy Code (IBC) era saw a fragmented legal regime, encompassing a multitude of statutes such as the Companies Act, 1956, the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI), and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). This dispersion led to protracted delays in resolving insolvency cases, often extending to an average of 4.3 years or even 1500 days, with creditors typically recovering less than 25% of their dues. The system's primary emphasis was on winding up businesses rather than facilitating their revival, contributing to India's dismal 136th ranking in the "resolving insolvency" component of the World Bank's "Ease of Doing Business" index in 2015. Historically, while ancient Indian texts like the Vedas and Dharmashastras recognized debt and repayment, and medieval periods saw financial instruments like Hundis, a modern, cohesive insolvency law remained elusive until recently.
The enactment of the Insolvency and Bankruptcy Code, 2016, marked a transformative moment in India's economic reforms. Born from the recommendations of expert committees, notably the Bankruptcy Law Reforms Committee (BLRC) chaired by Dr. T. K. Vishwanathan, the IBC consolidated disparate insolvency laws under a single, unified framework.1 The BLRC advocated for a comprehensive framework, time-bound resolution, empowering creditors, and establishing new regulatory bodies and professionals.
