Strategic Dissent In India's CIRP: Unpacking Incentives, Systemic Impacts, And The Quest For Efficiency
- IJLLR Journal
- Dec 17, 2025
- 2 min read
Gauraansh Arora, B.A, LL.B. (Hons.), National Law University, Jodhpur
ABSTRACT
India's Insolvency and Bankruptcy Code, 2016 (hereinafter, “IBC”) was designed with one of its core objectives being to balance stakeholder interests. When a Corporate Insolvency Resolution Process (hereinafter, “CIRP”) is initiated, the Financial Creditors (hereinafter, “FCs”) get the driver’s seat and the collective “commercial wisdom” of the Committee of Creditors (hereinafter, “CoC”) is relied upon for a successful insolvency procedure. In the CoC, the FCs have a proportional voting share, and the FCs voting against a Resolution Plan that passes are afforded an array of statutory rights. These Dissenting Financial Creditors (“DFCs”) get preferential rights that has power to be exploited. This dichotomy has given rise to strategic dissent, where creditors are capable of leveraging their protected position not merely for self-preservation but for preferential gain, mirroring the classic “holdout problem” in corporate finance and threatening the time and monetary efficiency IBC was designed to achieve.
This article posits that strategic dissent, supported by statutory initiatives and furthered by judicial ambiguity, poses a significant threat to the efficacy of the Corporate Insolvency Resolution Process (hereinafter, “CIRP”). It argues that the current framework, by creating a predictable difference between collective commercial outcomes and individual statutory allowances, incentivizes dissent that prolongs timelines, erodes asset value, and fosters litigation. The analysis traces the source of these incentives, examines oscillating judicial interpretations, and assesses the systemic impact on CIRP efficiency. Ultimately, this article argues that a durable solution necessitates a comprehensive review of the Code, drawing lessons from other jurisdictions with judicially supervised “cramdown” mechanisms to align the right of dissent with the overarching goal of resolution in a time- bound and equitable manner.
