IBC Act: Insolvency Resolution Process, Key Provisions

Key Insights 

1. It combined India’s different insolvency laws into a single system, giving creditors a leading role in resolving cases.
    
2. The 2024-25 amendments introduced CIIRP and expanded PPIRP to make the process even faster.
    
3. The IBC Act India Code is different from offshore laws like the IBC Act Bahamas.

The IBC Act India Code is a law from 2016 in India that helps settle debt problems. Section 14 of IBC Act sets a moratorium to protect companies. For IBC Act UPSC exams, remember this is different from the IBC Act Bahamas and the IBC Act full form is Insolvency and Bankruptcy Code.

What is the IBC Act?

The Insolvency and Bankruptcy Code (IBC), 2016 is India’s main law for dealing with insolvency in companies, partnerships, and individuals. It replaced several older and slower laws with one system that lets creditors take control. The aim is to either save struggling businesses within 180 to 330 days or close them if that cannot be done.

Here are the main points you need to know about the IBC Act:

• Purpose: The Act combines all existing laws, such as SICA and SARFAESI, into one. This helps increase the value of assets and makes more credit available.
• Time-Bound Process: The law sets a fast process, starting with 180 days to resolve cases. If needed, this can be extended by 90 days.
• Key Institutions: The Act set up the Insolvency and Bankruptcy Board of India (IBBI), special tribunals like NCLT and DRT, and trained Insolvency Professionals.
• Creditor-Driven: The Act shifts control from the debtor to the Committee of Creditors (CoC), who make the key decisions.
• ReRescue Culture: The main goal is to help companies recover and keep running, using liquidation only if there is no other option.

The IBC Act has improved India’s financial system by setting up a straightforward and quick process that helps save businesses and benefits everyone involved.

How to Use the IBC Act?

If you want to use the Insolvency and Bankruptcy Law in India, you need to understand the main IBC sections to resolve cases. IBC law full form means Insolvency and Bankruptcy Code. This law in the Insolvency Act India is different from similar laws in other countries, like the IBC Act Seychelles.

The Insolvency and Bankruptcy Law in India helps manage financial problems by providing a clear legal process. The Insolvency Act India explains each step, from starting a case to resolving it, in separate IBC sections.

Example:

A financial creditor can use IBC sections such as Section 7 of the IBC to start insolvency proceedings against a company that has defaulted. This process follows the Insolvency Act in India, which is different from the IBC Act Seychelles that applies to international business companies.

Highlights of the IBC Act

The IBC brought major changes to India’s financial system by setting up a clear way to handle insolvency. Its main goals are to protect creditor rights and help businesses. 

Why was the IBC Act introduced?

Here is the information on why the IBC Act was introduced in India:

• Before 2016, laws such as SICA, SARFAESI, and the Companies Act were not unified. This led to long delays and low recovery rates, usually between 5% and 20%.
• Earlier systems were slow and often took two to four years. The IBC, however, set a target of 180 to 270 days.
• An increase in non-performing assets in the banking sector created risks for financial stability.
• The main goals are to maximise asset value, support entrepreneurship, improve credit availability, and balance the interests of all stakeholders.

The ibc law full form is Insolvency and Bankruptcy Law, and IBC was set up to combine a scattered and inefficient legal system into a single, faster process. This change helps stabilise the financial system.

Bonus Tip: The National Company Law Tribunal (NCLT) must decide whether to admit an application within 14 days. If there is a delay, the NCLT must provide written reasons.

Recent Changes (2024–2025) & Proposed Amendments (Amendment Bill, 2025)

The main aim of IBC changes is to make the process faster, give creditors more rights, and address complex cases such as real estate projects.

• The 2025 Bill introduces a new out-of-court process called the Creditor-Initiated Insolvency Resolution Process (CIIRP). This allows certain financial creditors to start insolvency proceedings.
• Amendments in 2024–25 expanded the Pre-Packaged Insolvency Resolution Process (PPIRP) beyond MSMEs to include larger companies. This change allows for quicker resolutions where the debtor stays in control.
• The 2025 Bill requires the NCLT to admit applications within 14 days. Liquidation must be completed in 180 days, with a possible 90-day extension.
• The new Group Insolvency Framework sets rules for resolving insolvency for a group of companies at the same time.
• The changes introduce rules for cross-border insolvency. These help manage foreign assets and creditors, often following the UNCITRAL Model Law.
• The 2025 Bill makes it clear that government taxes do not have the same priority as secured creditors. This change overrules earlier court decisions.
• The review period for suspect or fraudulent transactions now begins on the date the application is filed, rather than only on the admission date.
• There are now new penalties of up to ₹2 crore for filing applications that are frivolous or meant to cause trouble.
• CoC Supervises The Committee of Creditors (CoC) now has the power to oversee the liquidation process and to replace the liquidator if needed.

The 2024-25 changes to the IBC are helping cases move faster, giving creditors more rights, and making the system wider and more effective.

History and Background of the IBC ACT

The Insolvency and Bankruptcy Code (IBC), 2016, was introduced to improve India’s slow and inefficient insolvency system. Starting on 28 May 2016, it combined several laws into one process, giving creditors more control and helping to reduce non-performing assets (NPAs).

Background and Need for the IBC Act
 

Before 2016, the laws for handling insolvencies did not work well. This caused low recovery rates and long delays. The main problems were:
 

The IBC was created to fix problems like inconsistent laws, long wait times, and insolvency processes controlled by debtors, which all made things harder for creditors.

Features & Importance of IBC ACT 

If you think the IBC Act is just another law? It actually flipped the script on how companies bounce back from financial trouble. 

Now, creditors get priority and assets are handled fast, so recoveries are smoother and more effective than ever in India. Here are the key features of the IBC Act:
 

The IBC Act turns complicated financial problems into a clear, creditor-focused process. This helps recover your assets and keeps your businesses safe.

Conclusion

The IBC Act has transformed India's financial system by introducing a quicker insolvency process that puts creditors first. This change speeds up asset recovery, promotes responsible lending, and helps the economy so that businesses can keep running without dragging the economy down.

FAQs

What happens to civil cases against companies once they are liquidated under the Insolvency and Bankruptcy Code (IBC)?  

When a company goes into liquidation under the Insolvency and Bankruptcy Code (IBC), Section 33(5) puts a stop to starting any new lawsuits or legal actions by or against the company. Only the liquidator, with approval from the NCLT, can begin new cases. Most ongoing civil cases are put on hold, but the liquidator can still defend them.

If the former is true, what can the litigants do during the civil case's pendency to ensure they obtain the relief they seek?  

If a person’s rights are violated and they have the legal right to go to court under Section 9 of the Civil Procedure Code, they can take steps during the civil case to make sure the relief they want is not lost because of delays or actions by the other side.

Can you throw some light on the Insolvency and Bankruptcy Code (IBC), 2016, in layman’s terms?  

The Insolvency and Bankruptcy Code (IBC), 2016, is a law in India that helps save struggling businesses or close them to recover debt. It replaced several older laws to make the process faster. Creditors, such as banks, can now take charge and try to fix bad loans within about 330 days. If the business cannot be revived, its assets are sold. This approach helps strengthen the economy.

What is the Insolvency and Bankruptcy Code 2016 of India? 

The Insolvency and Bankruptcy Code (IBC), 2016, is India’s main law for handling insolvency cases involving companies, partnerships, and individuals. It brings together earlier laws to make debt resolution faster, help recover more value from assets, and protect creditors. The code gives creditors more control over the process and aims to resolve cases within 180 days, which can be extended, or else the company must be liquidated.

Should the RP wait for a decision on Section 19(2) petitions seeking books of accounts before constituting the CoC?

The RP should form the CoC within the required timelines based on the admitted claims, rather than waiting for orders under Section 19(2). The RP should also request the urgent listing of these cases.