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IBC reforms: Government moves to fix insolvency delays

March 29, 2026 5 min read Economics Polity & Governance GS2 GS3
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What Happened

  • The Union Cabinet approved a comprehensive set of amendments to the Insolvency and Bankruptcy Code (IBC), 2016, accepting all recommendations of the Parliamentary Select Committee that had reviewed the proposed bill.
  • The amendment bill introduces group insolvency provisions, allowing multiple interconnected companies belonging to the same corporate group to be resolved together through joint creditor committees and a common insolvency professional, preventing duplication and maximising recovery.
  • A Creditor-Initiated Insolvency Resolution Process (CIIRP) has been proposed, enabling select financial institutions to commence insolvency proceedings outside the formal court system, reducing the initial burden on the National Company Law Tribunal (NCLT).
  • A globally aligned cross-border insolvency framework is being introduced, providing for recognition of foreign insolvency proceedings and cooperation between Indian and foreign courts for multinational group resolutions.
  • Prepackaged insolvency for large corporations is also included in the reform package, extending a mechanism already available for micro, small, and medium enterprises (MSMEs) to bigger firms.
  • Over 30,000 IBC cases were pending before the NCLT as of March 2025, and without structural reform, clearing this backlog could take over a decade at current capacity.

Static Topic Bridges

Insolvency and Bankruptcy Code, 2016

The Insolvency and Bankruptcy Code (IBC) was enacted in 2016 to consolidate and replace the fragmented insolvency laws previously spread across the Companies Act, SICA, SARFAESI Act, and the Recovery of Debts Act. It created a single, time-bound framework for resolving insolvency of corporate persons, partnership firms, and individuals, with the National Company Law Tribunal (NCLT) as the primary adjudicating authority for companies.

  • Corporate Insolvency Resolution Process (CIRP) must be completed within 180 days, extendable to 330 days including litigation periods.
  • The Code introduced the concept of the Committee of Creditors (CoC), replacing management with creditors as the primary decision-making body during insolvency.
  • Insolvency Resolution Professionals (IRPs) are licensed practitioners who manage the corporate debtor's affairs during the CIRP.
  • The Insolvency and Bankruptcy Board of India (IBBI) is the apex regulatory body for the ecosystem.
  • As of 2025, the average CIRP resolution time had stretched to over 600 days — nearly double the 330-day outer limit — due to NCLT bench strength constraints and frequent litigation-related exclusions.

Connection to this news: The proposed amendments directly target this time overrun problem by introducing pre-admission filtering through CIIRP, group resolution mechanisms, and prepackaged processes that reduce the number of cases requiring full NCLT adjudication.

National Company Law Tribunal (NCLT) and Judicial Capacity

The NCLT was established under the Companies Act, 2013, and became the primary adjudicating authority under the IBC from 2016. It replaced the Company Law Board and merged the jurisdiction of the Board for Industrial and Financial Reconstruction (BIFR). The NCLT operates through a network of benches across major cities, with appeals lying to the National Company Law Appellate Tribunal (NCLAT).

  • The NCLT's dual role — handling both company law matters and IBC proceedings — has created significant capacity pressure.
  • The sanctioned bench strength of NCLT has often remained unfilled, with vacancies being a chronic structural problem.
  • The Supreme Court has repeatedly intervened to direct timely appointments and to discipline procedural delays under the IBC.
  • Cross-border insolvency, now proposed to be addressed by the amendments, currently has no statutory mechanism in India; courts have relied on private international law principles.

Connection to this news: The CIIRP mechanism, which allows out-of-court commencement of proceedings, directly reduces the initial filing burden on NCLT benches and is designed to decongest the tribunal's docket.

Group Insolvency and Cross-Border Frameworks

Group insolvency refers to coordinated resolution of multiple legally distinct but economically interconnected companies within a corporate group. Most major insolvencies — Videocon, Dewan Housing, Reliance Capital — involved complex webs of subsidiaries and inter-company transactions that IBC was not equipped to handle as a single proceeding.

  • The United Nations Commission on International Trade Law (UNCITRAL) Model Law on Enterprise Group Insolvency (2019) provides the international template for group proceedings.
  • Cross-border insolvency is governed by the UNCITRAL Model Law on Cross-Border Insolvency (1997), which India has not yet formally adopted; the proposed amendments aim to incorporate these principles.
  • Without group insolvency provisions, resolution professionals are forced to initiate separate CIRPs for each subsidiary, leading to conflicting resolution plans, asset stripping between entities, and delays.
  • Several major economies — UK, Singapore, USA — have well-developed group insolvency regimes that India's amendments seek to align with.

Connection to this news: The new amendment's group insolvency framework directly addresses the Videocon-class problem, enabling a single coordinated process for conglomerates with dozens of subsidiary entities.

Prepackaged Insolvency Resolution Process (PPIRP)

Prepackaged insolvency (or "pre-pack") is a hybrid mechanism where the debtor and its major creditors negotiate a resolution plan before formal insolvency is filed, then submit it to the tribunal for approval. This accelerates resolution by starting the formal process with a plan already in hand, dramatically reducing the time between filing and approval.

  • India introduced PPIRP for MSMEs in April 2021 via an ordinance, allowing eligible MSME debtors to negotiate with creditors and file a resolution plan within 120 days.
  • In the UK, pre-packs have been widely used since 2009, with the administrator arranging a sale before appointment, minimising business disruption.
  • Pre-packs are particularly suited to going-concern sales, where the business retains value only if the transfer is seamless and swift.
  • Extending PPIRP to large corporations — as now proposed — would be a significant structural shift, requiring additional safeguards against misuse by promoters.

Connection to this news: The proposed extension of prepackaged insolvency to large corporations could significantly reduce the NCLT burden for cases where creditors and debtors have already reached agreement, converting contested adjudication into a more administrative approval process.

Key Facts & Data

  • IBC enacted: May 2016; came into full effect by December 2016
  • Adjudicating authority: NCLT (companies), DRT — Debt Recovery Tribunal (individuals/partnership firms)
  • CIRP timeline: 180 days (extendable to 330 days, including court exclusions)
  • Pending NCLT cases (March 2025): over 30,000
  • Apex regulator: Insolvency and Bankruptcy Board of India (IBBI), under Ministry of Corporate Affairs
  • Amendment also covers changes to the Companies Act and Limited Liability Partnership (LLP) Act
  • ICRA assessment: Amendments are encouraging but do not fully resolve real estate sector structural issues
  • Cross-border framework modelled on UNCITRAL Model Law on Cross-Border Insolvency (1997)
  • Group insolvency framework modelled on UNCITRAL Model Law on Enterprise Group Insolvency (2019)
  • Prepackaged insolvency for MSMEs introduced: April 2021