Introduction
Since its enactment in 2016, the Insolvency and Bankruptcy Code (IBC) has changed how India resolves corporate insolvency. But is IBC effective enough, or do we need IBC 2.0 for stronger creditor protection and faster resolution?
What Made IBC a Game-Changer?
- Before IBC, recovery was governed by scattered laws like SARFAESI and RDDBFI.
- IBC unified insolvency under one roof, cutting delays.
- It introduced the Committee of Creditors (CoC), giving financial creditors the main say.
- As per IBBI data (2024), ~75% of admitted cases get resolved within 330 days.
Legal Reference:
Section 12 IBC mandates completion within 330 days. Official IBBI Data.
Challenges Facing the Current IBC
Despite its success, several issues persist:
| Key Issue | Impact |
|---|---|
| Delayed resolution due to litigation | Average case stretches to 500+ days |
| Low recovery in some sectors | Stressed assets sold at deep discounts |
| Overburdened NCLTs | Pendency affects timely resolutions |
| Abuse by Operational Creditors | Small claims clog the system |
IBC 2.0: What Reforms are Needed?
IBC effectiveness must evolve with market needs. Experts suggest:
Strengthen Pre-Pack Schemes
For MSMEs, quick pre-pack insolvency should be more attractive.
Expand NCLT Benches
More benches, more judges — faster resolution.
Discourage Frivolous Petitions
Higher thresholds for operational creditors.
Encourage Cross-Border Insolvency Rules
Align with UNCITRAL Model Law for global cases.
Recent Case Law: A Reality Check
In Vidarbha Industries Power Ltd v. Axis Bank Ltd (2022) SC, the Supreme Court ruled that NCLT has discretion even if default exists. This shows how judicial interpretation affects IBC effectiveness.
Expert View: What India Inc Needs Now
CA R. Menon, Corporate Insolvency Advisor:
“India needs IBC 2.0 with digital-first NCLTs, robust pre-packs, and AI-based case tracking to avoid pile-ups.”
Should Businesses Worry?
No — but staying compliant and planning debt strategy is key. Use resolution as last resort, not first defence.
Closing Thoughts
The IBC effectiveness story is strong but not flawless. India Inc deserves IBC 2.0 — faster, clearer, and future-ready.
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Quick FAQs
Q1. What is IBC’s time limit for resolution?
330 days under Section 12, but extensions happen.
Q2. Is pre-pack insolvency available for all companies?
Currently limited to MSMEs as per 2021 rules.
Q3. Where to check latest IBC stats?
Visit ibbi.gov.in for updates.
Summary
India’s IBC effectiveness has improved debt resolution since 2016 but faces delays and misuse. Many experts argue it’s time for IBC 2.0 with stronger benches, digital tools and global alignment. Explore what reforms businesses should expect next.