A Decade of IBC: How Indias Insolvency Code Reshaped Creditor and Debtor Behaviour

The Insolvency and Bankruptcy Code, 2016, completes a decade of operation soon, and its impact on how Indian companies, lenders and investors behave with stressed assets has been substantial. Before the IBC, there was no single law that brought corporate distress under one umbrella.

Earlier, creditors had to chase their dues through a patchwork of laws including the Sick Industrial Companies Act, the Recovery of Debts due to Banks and Financial Institutions Act, and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, often referred to as SARFAESI. Even the Reserve Bank of India's own stress resolution schemes, such as the corporate debt restructuring framework, struggled to produce timely outcomes. While lenders were stuck with overlapping forums, promoters continued to control loss-making firms and the underlying value of the business kept eroding.

The IBC changed the playing field by setting a strict time-bound process and by introducing a real threat that promoters could lose control of their company on default. The single most important shift was the move from a debtor-in-possession model, where management stayed in charge during insolvency, to a creditor-in-control model. Once an insolvency application is admitted, the existing management is replaced by a resolution professional, and a Committee of Creditors (CoC) takes the major commercial decisions about the company's future.

Indian courts have consistently protected the commercial wisdom of the CoC and have blocked back-door attempts by ineligible promoters to win back their companies. The Code also targets personal guarantors of corporate debtors, who are often the same promoters. The Supreme Court has upheld this framework in several rulings. In State Bank of India versus V. Ramakrishnan (2018), the court held that the moratorium under Section 14 does not protect personal guarantors. In Lalit Kumar Jain versus Union of India (2021), it backed the legal validity of bringing personal guarantor provisions into force. In Ghanshyam Mishra and Sons versus Edelweiss Asset Reconstruction (2021), it ruled that an approved resolution plan binds all stakeholders, including guarantors.

The RBI also used its statutory powers to push large defaulters into the IBC. In June 2017, it directed lenders to take twelve large corporate defaulters, each owing more than 5,000 crore rupees, to the National Company Law Tribunal. This group included ABG Shipyard, Bhushan Power and Steel and Jaypee Infratech, popularly called the Dirty Dozen. A second list followed in August 2017 with names such as Videocon and IVRCL. Under Section 227 of the Code, the RBI also pushed select non-banking finance companies and housing finance firms, including DHFL and Srei group entities, into the IBC process to ensure an orderly resolution.

As of March 2026, data from the Insolvency and Bankruptcy Board of India shows that financial creditors recovered, on average, about 32 per cent of their admitted claims through approved resolution plans, and around 168 per cent of the estimated liquidation value of the firms. Equally important, the fear of losing control has pushed many defaults to be settled out of court, either before admission or by withdrawal before the case formally begins.

The Code continues to evolve. The 2026 amendments, which came into effect on 26 May 2026, aim to cut delays in resolution, ease the case load at the NCLT, introduce a group insolvency mechanism for coordinated resolution of related companies, and lay the ground for a cross-border insolvency framework.