The Insolvency and Bankruptcy Code, 2016

What it does

The Code (Act No. 31 of 2016) consolidated the laws on the insolvency of companies, limited liability partnerships, partnership firms and individuals. Its main process is the corporate insolvency resolution process. A financial creditor, an operational creditor or the corporate debtor itself applies to the National Company Law Tribunal. If the Tribunal admits the application, a moratorium restrains proceedings against the company, an interim resolution professional takes over its management, and a committee of creditors is formed.

The committee of creditors decides whether to approve a resolution plan, and the Tribunal approves the plan the committee has accepted. If no plan is approved, the company goes into liquidation, and the proceeds are distributed in the order of priority the Code fixes. The courts have treated the committee's business judgment on a plan as largely beyond review, which is the idea the site's glossary calls commercial wisdom.

The Code also provides for avoidance of certain transactions made before the insolvency, such as preferential, undervalued, extortionate and fraudulent transactions, for voluntary liquidation of a solvent company, and for the Insolvency and Bankruptcy Board of India as the regulator of professionals and information utilities.

Who it binds

Companies and limited liability partnerships in the corporate process, and the creditors, promoters and professionals who act in it. A person who is ineligible under section 29A cannot submit a resolution plan for the company, which was added to stop a promoter from regaining a company at a discount. The Code's provisions on individuals are in force only in part, and the provisions on personal guarantors to corporate debtors are the part used most.

What moved out of it

The Code took over the insolvency provisions of several earlier laws. Winding up of a company on the ground of inability to pay debts went from the Companies Act to this Code, and the older laws on sick industrial companies and on presidency and provincial insolvency were repealed or amended in the process. A creditor whose claim is a debt now chooses between the Code and the recovery laws, and the Code's moratorium stops enforcement under the recovery law once it begins.

What has changed, and when

The Code has been amended many times. The 2018 amendment inserted section 29A and gave allottees in real estate projects the status of financial creditors. The 2019 amendment fixed an overall limit of 330 days for the process, with litigation included. In 2020, section 10A suspended fresh applications for a stated period during the pandemic, and section 32A protected the company after a plan is approved. In 2021, a pre-packaged process was introduced for corporate debtors that are micro, small or medium enterprises.

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 received assent on 6 April 2026, and most of it commenced on 26 May 2026. The site's note on the amendment records that two chapters, the creditor-initiated insolvency resolution process and group insolvency, were left out of the commencement notification and are not law as at 28 October 2026. It records that admission of a financial creditor's application is now to be decided within fourteen days, that the Tribunal is to rule on a resolution plan within thirty days, and that a liquidation is to be completed within a stated period with an extension.

What turns on it in practice

For a lender, the question is whether the value recovered through the process, and the time it takes, outweigh what the alternatives yield. The site's note states that a resolution plan takes on average 633 days against a statutory ceiling of 330, so the time cost is large, and the lender's decision turns on the carrying cost as well as the haircut.

For a promoter, the Code means that a default above the threshold can lead to loss of control. For an operational creditor, filing with an information utility is now a precondition to an application. For an acquirer, section 29A and the finality of an approved plan are the points that decide whether a bid can be made. The firm's insolvency practice and its banking practice both work under the Code, and the avoidance sections, the committee of creditors and the information utility are among the terms in the glossary that rest on it.