Why this matters now
IBC is tested for the corporate insolvency resolution process (CIRP) timeline, the Committee of Creditors’ commercial wisdom doctrine, Section 29A bar on related-party bidders, the role of the Insolvency & Bankruptcy Board of India (IBBI), and landmark cases (Swiss Ribbons, Essar Steel, JK Jute Mills, Asahi Songwon, Innoventive).
Genesis: BLRC (T.K. Viswanathan Committee)
India had multiple overlapping insolvency laws: SICA 1985 (BIFR), SARFAESI 2002, RDDBFI 1993, Companies Act 1956 winding-up. Average resolution took 4.3 years, recovery 26 cents on the dollar. The Bankruptcy Law Reforms Committee (BLRC) under T.K. Viswanathan recommended a consolidated code in November 2015. Parliament passed IBC on 28 May 2016.
Corporate Insolvency Resolution Process (CIRP)
| Stage | Detail |
|---|---|
| Trigger | Default on debt of at least Rs 1 crore; financial creditor, operational creditor or corporate debtor itself may file. |
| NCLT admission | NCLT admits application within 14 days; declares moratorium under Section 14 — protects assets, suspends all suits. |
| Interim Resolution Professional (IRP) → RP | IRP appointed; constitutes Committee of Creditors (CoC) of all financial creditors. |
| CoC | Decides on Resolution Plan by 66% voting share. Has “commercial wisdom” per SC in Essar Steel (2019). |
| Resolution Plan | Selected plan must address payment to creditors as per liquidation waterfall priority (§ 30(2)). Approved plan binding on all. |
| Timeline | 330 days total (180 + 90 extension + 60 litigation buffer). If unmet, automatic liquidation. |
| Section 29A bar | Promoters of defaulting companies, wilful defaulters, related parties barred from bidding for the same company — key safeguard against round-tripping. |
Key cases
- Innoventive Industries v. ICICI (2017) — first major IBC case; SC clarified that NCLT need only find “debt & default” to admit.
- Swiss Ribbons v. Union of India (2019) — SC upheld constitutional validity of IBC including Section 29A bar.
- Essar Steel India Ltd v. Satish Kumar Gupta (Nov 2019) — SC upheld the Committee of Creditors’ commercial wisdom; resolution plan binding even on dissenting creditors; financial creditors and operational creditors can be treated differently.
- Jet Airways resolution (2019-ongoing) — first major cross-border insolvency (with Dutch trustee).
By 2024: ~7,000 CIRPs admitted; resolved ~890; liquidations ~2,500; recovery rate ~31% (vs 26% pre-IBC); average time ~614 days (vs 4.3 years pre-IBC).
UPSC angle
Know IBC 2016 — passed unanimously 28 May 2016 on BLRC (T.K. Viswanathan) recommendation; consolidates SICA/SARFAESI/RDDBFI/Companies Act winding-up; trigger = default ≥ Rs 1 crore; NCLT admission in 14 days, moratorium §14; Committee of Creditors (CoC) “commercial wisdom” 66% vote (Essar Steel 2019); RP runs the show; 330-day total timeline (180 + 90 + 60); §29A bars promoters/wilful defaulters/related parties; Insolvency & Bankruptcy Board of India (IBBI) is regulator; Innoventive 2017 + Swiss Ribbons 2019 + Essar Steel Nov 2019 + Jet Airways cross-border 2019.
Frequently asked questions
What is the IBC’s timeline for CIRP?
330 days — 180 + 90 extension + 60 days litigation buffer. If unmet, automatic liquidation.
What is the Committee of Creditors?
A body of all financial creditors of a defaulting company, formed during CIRP. It decides on resolution plan with 66% voting share.
What is Section 29A?
A bar preventing promoters of defaulting companies, wilful defaulters and related parties from bidding for the same company under IBC.
Who regulates IBC?
The Insolvency and Bankruptcy Board of India (IBBI) — established under Section 188 of the IBC.