SYMBIOSIS LAW SCHOOL, NAGPUR

Constituent of

SYMBIOSIS INTERNATIONAL (DEEMED UNIVERSITY), PUNE

(Established under Section 3 of the UGC Act, 1956)

Re-accredited by NAAC with ‘A++’ Grade, Awarded Category – I by UGC.

PROPOSAL FOR LLM DISSERTATION

The Insolvency and Bankruptcy Code, 2016: Evolution, Effectiveness, and the Road Ahead

Under the Guidance of :-

Dr. Abhijit Rajan

Symbiosis Law School, Nagpur

-: Submitted by :-

Unmesh Rajesh Jamdar

LLM – II Semester

PRN- 24010441018

BATCH : 2024-25

Submitted in the partial fulfilment of the requirement for the Award of LL.M Degree in
Business and Corporate Law.
CONTENT

1. BACKGROUND OF STUDY
2. STATEMENT OF RESEARCH PROBLEM
3. RATIONALE
4. OBJECTIVES OF STUDY
5. RESEARCH QUESTIONS
6. REVIEW OF LITERATURE
7. SCOPE OF STUDY
8. RESEARCH METHODOLOGY
9. LIMITATIONS OF STUDY
10. SCHEME OF STUDY/TENTATIVE CHAPTERIZATION
BACKGROUND OF STUDY

The Insolvency and Bankruptcy Code, 2016 (IBC) was introduced as a transformative legal
framework to address India’s long-standing issues with insolvency resolution and corporate debt
recovery. Before its enactment, India had a fragmented insolvency regime, governed by multiple laws
such as the Sick Industrial Companies Act (SICA), the Recovery of Debts Due to Banks and Financial
Institutions Act (RDDBFI), the Companies Act, and the SARFAESI Act. These laws led to prolonged
litigation, delayed recoveries, and high levels of non-performing assets (NPAs) in the banking sector.

The IBC aimed to streamline the insolvency resolution process, ensuring time-bound resolution,
maximizing asset value, and promoting creditor confidence. It introduced a corporate insolvency
resolution process (CIRP), strict timelines, and a shift from a debtor-in-possession to a creditor-in-
control model. Over the years, the code has played a crucial role in reshaping India’s financial
landscape, but challenges remain, such as delays in NCLT proceedings, judicial interpretations
affecting commercial decisions, and the absence of a cross-border insolvency framework.

This dissertation aims to critically analyze the evolution, effectiveness, and future of the IBC, 2016,
assessing its impact on corporate debt resolution, institutional challenges, and possible reforms.
Statement of the Research Problem

The Insolvency and Bankruptcy Code, 2016 (IBC) was introduced as a comprehensive legal
framework to address the inefficiencies in India’s insolvency resolution system. It aimed to ensure
time-bound resolution, maximize asset value, and balance the interests of all stakeholders. However,
despite its initial success, several challenges have emerged that hinder its effectiveness in achieving
its objectives.

Key Research Problems:

1. Delays in Resolution:
• Although IBC prescribes a 330-day timeline for corporate insolvency resolution,
many cases exceed this limit due to judicial backlogs, frequent litigation, and procedural inefficiencies
at the National Company Law Tribunal (NCLT).
• Example: In the Essar Steel case, the resolution process took nearly 900 days,
highlighting concerns over procedural delays.
2. Low Success Rate of Resolution Plans:
• A significant number of cases result in liquidation rather than resolution. As per IBBI
data (2023), only 15-20% of cases lead to a successful resolution plan, while a large portion ends in
liquidation, raising concerns about whether the IBC truly helps in business revival.
3. Judicial Overreach and Inconsistent Interpretations:
• The Supreme Court, NCLAT, and NCLT have delivered several judgments that have
altered the interpretation and application of IBC provisions.
• Example: The Swiss Ribbons case (2019) upheld the IBC’s constitutional validity but
led to modifications in the role of resolution professionals and creditors’ rights.
4. Challenges Faced by Creditors:
• Operational creditors often receive minimal recovery in resolution plans due to the
dominance of financial creditors in the Committee of Creditors (CoC).
• The Jet Airways insolvency case highlighted concerns regarding unequal treatment of
creditors and the difficulties faced by foreign lenders.
5. Lack of a Cross-Border Insolvency Framework:
• In an era of globalization, many Indian companies have assets and creditors in
multiple jurisdictions. However, India still lacks a structured cross-border insolvency mechanism,
leading to complications in resolving transnational insolvency cases.
• Example: The Videocon Group insolvency involved creditors across various
countries, exposing gaps in India’s insolvency laws regarding international cooperation.
6. Regulatory and Institutional Challenges:
 • The NCLT and NCLAT are overburdened with cases, leading to delays in insolvency
resolution.
• The role of resolution professionals (RPs) has come under scrutiny due to allegations
of mismanagement, lack of accountability, and conflicts of interest.

Research Justification:

While the IBC has significantly transformed India’s insolvency regime, these challenges raise critical
concerns regarding its effectiveness and long-term sustainability. This research seeks to analyze the
gaps in the current framework, evaluate its impact on corporate insolvency resolution, and propose
reforms to enhance its efficiency.
RATIONALE

The Insolvency and Bankruptcy Code, 2016 (IBC) was introduced as a transformative legal
framework to streamline India's insolvency resolution process, replacing a fragmented and
inefficient system. While the IBC has significantly improved the speed and efficiency of
debt resolution, its implementation has revealed several challenges and gaps that need to be
critically analyzed. The high rate of delays in resolution processes, the dominance of
financial creditors in decision-making, and the burden on the National Company Law
Tribunal (NCLT) have raised concerns about the effectiveness of the IBC in achieving its
objectives.

Furthermore, the lack of a comprehensive cross-border insolvency mechanism, coupled

with frequent judicial interventions and inconsistent interpretations, has led
to uncertainty and unpredictability in insolvency proceedings. Given India's evolving
corporate landscape and increasing global economic integration, an in-depth study of
the IBC’s strengths, weaknesses, and areas for reform is necessary to ensure that it
continues to serve as an effective tool for insolvency resolution.

This research is particularly relevant in the wake of recent amendments, landmark judicial
rulings, and empirical data from insolvency cases, which provide new insights into the
practical functioning of the IBC. By critically analyzing these aspects, this study aims to
contribute to the ongoing discourse on corporate insolvency law in India and provide policy
recommendations for strengthening the IBC framework to enhance its efficiency,
fairness, and global competitiveness.
OBJECTIVES OF STUDY

1. Evolution and Objectives of the IBC, 2016 – Examines the historical background, the need for a
comprehensive insolvency framework, and the legislative intent behind the IBC. Also compares the
IBC with pre-existing insolvency laws to highlight key improvements.

2. Effectiveness in Time-Bound Resolution – Evaluates whether the prescribed 330-day resolution

timeline is being followed and identifies factors causing delays at the National Company Law
Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT).

3. Role of Stakeholders in the Insolvency Resolution Process – Analyzes the effectiveness of the
Committee of Creditors (CoC), Insolvency Professionals (IPs), and Resolution Applicants in
achieving successful resolutions. Also studies the treatment of operational creditors and their role in
decision-making.

4. Judicial and Regulatory Challenges – Assesses key Supreme Court and NCLAT rulings that have
impacted the interpretation of IBC provisions and evaluates how judicial interventions have
influenced the rights of creditors and debtors.

5. Impact on India’s Financial and Business Environment – Examines the effect of the IBC on
banking sector NPAs, investor confidence, and India’s Ease of Doing Business rankings. Also
evaluates the success rate of resolution plans versus liquidation outcomes.

6. Identifying Gaps and Proposing Reforms – Addresses challenges such as delays, low resolution
success rates, and the absence of a cross-border insolvency mechanism. Proposes policy
recommendations to improve the efficiency, transparency, and effectiveness of the IBC.
Research Questions

1. Has the Insolvency and Bankruptcy Code, 2016 (IBC) effectively achieved
its objective of time-bound insolvency resolution, or do delays continue to
persist?

2. What role do financial creditors, operational creditors, and insolvency

professionals (IPs) play in the resolution process, and is the current
framework fair to all stakeholders?

3. How have judicial interventions and landmark Supreme Court/NCLAT

rulings impacted the interpretation and implementation of the IBC?

4. What are the key gaps in the current insolvency framework, and what policy
reforms can improve its efficiency and effectiveness?
 SCOPE OF STUDY

The scope of this study encompasses a comprehensive analysis of the Insolvency and
Bankruptcy Code, 2016 (IBC), focusing on its effectiveness, challenges, and potential
reforms. This research will cover the legislative framework, judicial interpretations, and
practical implementation of the IBC in resolving corporate insolvency cases in India.

It will examine the role of key stakeholders, including the Committee of Creditors (CoC),
Insolvency Professionals (IPs), National Company Law Tribunal (NCLT), and National
Company Law Appellate Tribunal (NCLAT), in ensuring a time-bound resolution process.
The study will also evaluate the impact of the IBC on creditor rights, debtor obligations,
and the broader financial ecosystem, including its effect on banking sector Non-
Performing Assets (NPAs) and investor confidence.

While the primary focus is on corporate insolvency, the study will also touch upon cross-
border insolvency issues, challenges faced by operational creditors, and judicial
delays in insolvency resolution. Furthermore, it will analyze key Supreme Court and NCLAT
rulings that have shaped the implementation of the IBC.

The geographical scope of the study is limited to India, with comparative references to
global insolvency frameworks where relevant. The time frame of the study primarily covers
the period from 2016 to the present, considering major amendments and judicial
developments in this period.

By identifying gaps in the existing framework and proposing reforms, this study aims to
contribute to policy discussions on strengthening India's insolvency regime.
RESEARCH METHODOLOGY

This study adopts a doctrinal research methodology, primarily relying on secondary sources
such as statutes, case laws, legal commentaries, journal articles, reports, and government
publications to analyze the Insolvency and Bankruptcy Code, 2016 (IBC). The research
involves a qualitative approach, focusing on the interpretation, application, and effectiveness
of the IBC in resolving corporate insolvencies.

The primary legal sources include the Insolvency and Bankruptcy Code, 2016, amendments,
and rules framed under it. Judicial precedents from the Supreme Court of India, the National
Company Law Tribunal (NCLT), and the National Company Law Appellate Tribunal
(NCLAT) will be analyzed to understand how the judiciary has interpreted and applied the
IBC.

Additionally, secondary sources such as reports from the Insolvency and Bankruptcy Board
of India (IBBI), Reserve Bank of India (RBI), World Bank’s Ease of Doing Business
Reports, and Parliamentary Committee Reports will be examined to assess the impact of the
IBC on India’s financial ecosystem. Scholarly articles, books, and research papers on
insolvency law will be reviewed to incorporate academic perspectives on the strengths and
limitations of the IBC.

For comparative analysis, international insolvency frameworks, such as Chapter 11 of the

U.S. Bankruptcy Code and the UK’s Insolvency Act, 1986, will be referenced to evaluate
global best practices and possible reforms for India’s insolvency regime.

The research does not involve empirical data collection but relies on a case study approach,
examining major insolvency cases such as Essar Steel, Jet Airways, Bhushan Steel, and
Dewan Housing Finance Corporation Ltd. (DHFL) to assess practical challenges in the
implementation of the IBC.

This methodology ensures a comprehensive, legal, and policy-driven analysis of the IBC,
offering insights into its effectiveness, judicial interpretation, and potential reforms.
Chapterization

Chapter 1: Introduction

This chapter introduces the study, outlining the context, significance, and objectives of the
research. It provides a brief overview of the Insolvency and Bankruptcy Code (IBC), 2016,
its evolution, and the research questions that guide the dissertation. Additionally, the chapter
includes a discussion on the study’s rationale, the methodology used, and its limitations.

Chapter 2: Background of Insolvency and Bankruptcy Law in India

This chapter delves into the historical development of insolvency law in India before the
enactment of the IBC. It examines the previous legal frameworks and the challenges that
necessitated a unified insolvency code. Key legislative milestones and reforms, such as the
Sick Industrial Companies Act (SICA) and Board for Industrial and Financial Reconstruction
(BIFR), are discussed to highlight the deficiencies in the old system.

Chapter 3: The Framework of the Insolvency and Bankruptcy Code, 2016

This chapter provides a detailed analysis of the provisions of the IBC, 2016, including its
structure, objectives, and key features. It covers topics such as the corporate insolvency
resolution process (CIRP), the role of creditors, the Committee of Creditors (CoC), and the
National Company Law Tribunal (NCLT). Additionally, the chapter explores the liquidation
process and the rights of stakeholders in the resolution framework.

Chapter 4: Challenges and Issues in the Implementation of IBC

This chapter identifies and critically evaluates the key challenges in the implementation of
the IBC. Issues such as judicial delays, excessive litigation, the role of operational creditors,
and the dominance of financial creditors are discussed. It also explores the limitations of the
330-day resolution timeline, the overburdened NCLT, and concerns around cross-border
insolvency. The chapter highlights real-life case studies and examples to illustrate these
challenges.

Chapter 5: Judicial Interpretations and Landmark Rulings

This chapter examines the judicial developments under the IBC, focusing on significant
rulings that have shaped the law’s evolution. It reviews landmark judgments such as Swiss
Ribbons (2019), Essar Steel (2019), and Vidarbha Industries (2022), analyzing their impact
on the interpretation of IBC provisions. The chapter also evaluates the role of the judiciary in
balancing the interests of creditors and other stakeholders.

Chapter 6: Comparative Analysis of IBC with Global Insolvency Frameworks

This chapter offers a comparative analysis of India’s insolvency framework with those of
other jurisdictions, particularly the United States, the United Kingdom, and European Union
countries. It assesses the strengths and weaknesses of the IBC in comparison to international
models, with a focus on areas such as resolution timelines, creditor protection, and cross-
border insolvency.

Chapter 7: Reform Proposals and Future of IBC

This chapter outlines possible reforms to improve the efficacy of the IBC. Drawing from the
findings in previous chapters, it proposes solutions to address issues like judicial delays, the
balance of power between financial and operational creditors, and cross-border insolvency.
The chapter also explores the potential for institutional capacity building and harmonization
with international insolvency frameworks, such as the UNCITRAL Model Law on Cross-
Border Insolvency.

Chapter 8: Conclusion

The final chapter provides a summary of the study’s findings, reflecting on the effectiveness
of the IBC in achieving its objectives. It also discusses the overall impact of the code on
India’s insolvency landscape and outlines key recommendations for improving the legal
framework. The chapter concludes with a brief outlook on the future of insolvency law in
India