The Insolvency and Bankruptcy Code, 2016 (“IBC”) is widely hailed as one of the most transformative economic legislations of modern India. Designed to consolidate fragmented insolvency laws into a unified framework, it sought to ensure time-bound resolution of distressed assets, maximize value for creditors, and improve the ease of doing business.[i]Nearly a decade later, the Code has delivered significant gains—enhanced creditor confidence, increased recovery rates compared to earlier debt recovery regimes, and an evolving jurisprudence around corporate distress.

Yet, implementation has also revealed structural gaps, interpretative dilemmas, and new-age challenges. This post examines six key themes shaping the current and future trajectory of the IBC: (i) practical challenges in implementation, (ii) pre-packaged insolvency for MSMEs, (iii) cross-border insolvency, (iv) ESG-linked corporate distress, (v) digital finance disruptions, and (vi) the judiciary’s shaping role.

The IBC prescribes a strict 330-day timeline for completion of the corporate insolvency resolution process (CIRP).[ii]However, empirical data from the Insolvency and Bankruptcy Board of India (IBBI) reveal that the average time taken often exceeds 600 days.[iii]Delays largely arise from valuation disputes, protracted litigation, and systemic capacity gaps at the National Company Law Tribunals (NCLTs).

Cases such as Committee of Creditors Essar Steel v. Satish Kumar Gupta[iv]and Jaypee Infratech Ltd. v. Axis Bank Ltd[v]  reflect the competing pulls between creditor primacy and protection of minority/consumer interests. Judicial interventions have often recalibrated the process to uphold principles of equity, but this has also contributed to time overruns. The introduction of the Pre-Packaged Insolvency Resolution Process (PPIRP) in 2021 was a welcome innovation, particularly for MSMEs. It combines the benefits of a debtor-in-possession model with creditor oversight, promising quicker and less adversarial resolutions.[vi]

However, uptake has been limited. IBBI’s 2024 quarterly reports highlight that only a handful of PPIRPs have been admitted.[vii]The low adoption suggests the need for awareness campaigns, simpler filing procedures, and greater creditor trust in this mechanism. Given the centrality of MSMEs to India’s economy, strengthening the PPIRP framework remains a pressing priority.

Globalized commerce demands a robust cross-border insolvency framework. Presently, India relies on ad hoc judicial recognition and bilateral treaties, as seen in cases such as Jet Airways (India) Ltd., where Indian and Dutch courts cooperated informally.[viii]

The Ministry of Corporate Affairs has circulated a draft framework based on the UNCITRAL Model Law on Cross-Border Insolvency (1997), but it remains pending.[ix] Adoption of this model would provide predictability, reciprocity, and efficiency in dealing with multinational defaults—critical in sectors like aviation, IT, and banking.

A new frontier for insolvency law lies in environmental, social, and governance (ESG) obligations. Globally, the EU’s Corporate Sustainability Due Diligence Directive (2023) links corporate accountability with financial restructuring. In India, industries such as mining, infrastructure, and energy—frequent subjects of insolvency pose a challenge: should ESG and environmental liabilities be extinguished in insolvency, or should they “survive’ resolution?

In Lalil Kumar Jain v. Union of India,[x]the Supreme Court affirmed the principle of promoter accountability for personal guarantees. A similar logic may be extended in future to enforce sustainability obligations, making insolvency proceedings more holistic and socially responsible.

The rise of fintech lending, digital-only banks, and crypto-assets is testing insolvency regimes worldwide. While India has not yet seen a major crypto-related insolvency, global examples like FTX demonstrate the complexities of resolving digital-asset-heavy firms.

At the same time, digitization of insolvency processes—blockchain-based creditor committees, Al-powered forensic audits, and e-filing platforms can help reduce delays and enhance transparency. The IBBI has begun exploring digital integration, but full-scale adoption is still evolving.

The Indian judiciary has played a decisive role in shaping the IBC. In Arcelor Mittal India Pvt. Lid. v. Satish Kumar Gupta,[xi]the Supreme Court clarified the eligibility of resolution applicants, while in Essar Steel, it upheld the primacy of the Committee of Creditors. Similarly, in Lalit Kumar Jain, the Court extended insolvency liability to personal guarantors of corporate debtors.

These rulings underscore the judiciary’s role not merely as an interpreter but as a co-architect of insolvency law—bridging legislative gaps, protecting public interest, and ensuring systemic stability.

The IBC has delivered notable progress in resolving corporate distress, but the challenges of delay, MSME adaptation, cross-border defaults, ESG integration, and digital disruption demand urgent policy attention. Going forward, India must:

• Expand the institutional capacity of NCLTs and insolvency professionals.
• Adopt the UNCITRAL Model Law for predictable cross-border cooperation.
• Embed ESG compliance in insolvency governance; and
• Digitize processes for efficiency and transparency.

The Code was always intended as a dynamic, evolving instrument. Its continued success will depend on aligning insolvency law not only with creditor recovery but also with sustainability, digital transformation, and global competitiveness.

[i] Statement of Objects and Reasons, Insolvency and Bankruptcy Code, 2016.

[ii] Insolvency and Bankruptcy Code, 2016, s. 12(3).

[iii] Insolvency and Bankruptcy Board of India, Quarterly Newsletter (Q4, 2024).

[iv] (2020) 8 SCC 531.

[v] (2020) 8 SCC 401.

[vi] (2020) 8 SCC 401.

[vii] IBBI, Handbook on Pre-Packaged Insolvency Resolution Process (2023).

[viii] Jet Airways (India) Ltd. [NCLAT, 2019].

[ix] Ministry of Corporate Affairs, Draft Cross-Border Insolvency Framework (2018).

[x] (2021) 9 SCC 321.

[xi] (2019) 2 SCC 1.