Corporate Insolvency Resolution Process under IBC, 2016: Efficiency, Challenges, and Judicial Trends

I. Evolution and framework of cirp under ibc

The Insolvency and Bankruptcy Code (IBC), 2016, was a transformative piece of legislation aimed at overhauling the insolvency framework in India. Before the enactment of IBC, the insolvency and bankruptcy landscape in India was fragmented, governed by numerous laws and procedures that were often inefficient, time-consuming, and ineffective in providing timely resolutions to distressed entities. This lack of coherence resulted in prolonged litigation, low recovery rates, and a failure to unlock the value of distressed businesses. The introduction of the IBC was an attempt to address these issues and ensure that India would have a modern, efficient, and time-bound insolvency process that could enhance ease of doing business and attract global investments.

Pre-IBC Insolvency Framework and Its Shortcomings

Before the IBC, India’s insolvency regime was governed by a patchwork of laws, including the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), the Companies Act, 1956, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act), and the Sarfaesi Act, 2002, among others. These laws failed to provide an efficient mechanism for the resolution of insolvency, often leading to:

1. Long delays: The process of resolving insolvency under these laws was often prolonged, with cases stretching for years due to judicial delays, frequent adjournments, and inefficient tribunal mechanisms.

2. Limited creditor participation: Creditors, particularly financial institutions and banks, had limited roles and influence in the decision-making processes related to the resolution of distressed assets.

3. Lack of value maximization: The absence of a structured, market-driven approach to insolvency meant that distressed companies were either liquidated for less than their potential value or kept alive in a zombie state without resolving their financial distress.

4. Ineffective recovery mechanisms: Recovery rates were often low, and the processes available for debt recovery failed to address the complexities of large corporate insolvencies.

In this context, the need for a more robust insolvency resolution process was felt, leading to the conceptualization and eventual implementation of the IBC.

Genesis and Objectives of the Insolvency and Bankruptcy Code, 2016

The IBC was conceived with the primary objective of addressing these systemic inefficiencies by consolidating and amending existing laws into a single framework that could provide a timely, transparent, and effective resolution mechanism for corporate insolvency. The key features of the IBC include:

• Time-bound resolution: The IBC introduced strict timelines for completing the Corporate Insolvency Resolution Process (CIRP), with a deadline of 180 days, extendable by another 90 days. This ensured that insolvency proceedings were not delayed indefinitely.
• Creditor-driven process: Unlike previous frameworks, which had minimal involvement from creditors, the IBC adopted a creditor-driven approach. Financial creditors, operational creditors, and the debtor were given central roles in the process.
• Establishment of NCLT and NCLAT: The IBC established specialized adjudicating authorities, namely the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), to expedite the resolution process and reduce the burden on regular courts.
• Resolution Professionals (RPs): A key innovation in the IBC was the appointment of Resolution Professionals (RPs) who are tasked with managing the insolvent company's operations, evaluating its financial position, and coordinating with creditors to devise a resolution plan.
• Committee of Creditors (CoC): The IBC emphasized the importance of the Committee of Creditors (CoC), comprising financial creditors, to evaluate and approve the resolution plans. This shift aimed to enhance transparency and accountability in the process.

With these provisions, the IBC sought to address the inefficiencies of the previous legal framework, enhance recovery rates for creditors, and ensure that distressed assets were either revived or liquidated in a manner that maximized their value.

II. The corporate insolvency resolution process (cirp) under ibc

The Corporate Insolvency Resolution Process (CIRP), as introduced by the IBC, is a comprehensive framework for addressing the insolvency of corporate debtors. It is a time-bound process that aims to achieve a balance between creditor protection and the revival of financially distressed businesses. The CIRP framework is designed to ensure that insolvency proceedings do not spiral into prolonged litigation but instead lead to a swift, transparent, and efficient resolution.

1. Initiation of CIRP

The CIRP can be initiated by a financial creditor, operational creditor, or the corporate debtor itself. The procedure for initiation is as follows:

• Financial Creditor: A financial creditor, which is a person to whom a financial debt is owed, may file an application before the NCLT if a default has occurred. The creditor must prove that a default of at least Rs. 1 crore has occurred.
• Operational Creditor: An operational creditor, typically a supplier of goods or services, can also initiate CIRP if a default in payment has occurred. The process requires the creditor to send a demand notice before filing an application with the NCLT.
• Corporate Debtor: The debtor company may initiate CIRP voluntarily if it acknowledges its financial distress and the need for resolution.

Once the application is admitted by the NCLT, a moratorium is immediately imposed, prohibiting the initiation of legal actions or proceedings against the debtor.

2. Appointment of Resolution Professional

After the initiation of CIRP, the NCLT appoints an Interim Resolution Professional (IRP), who takes over the management of the debtor company. The IRP assumes the responsibility of managing the day-to-day operations of the company, securing its assets, and calling for meetings of the creditors. The Resolution Professional (RP) is ultimately responsible for overseeing the entire resolution process.

3. Formation of Committee of Creditors (CoC)

One of the hallmark features of the IBC is the creation of the Committee of Creditors (CoC). The CoC is a body of financial creditors, who hold the majority of the debt, and it plays a central role in the decision-making process. The CoC evaluates resolution plans, approves the best possible resolution, and ensures that the process is managed in a fair and transparent manner.

4. Resolution Plan and Approval

Once the RP has compiled the necessary information and valuations of the distressed company’s assets, they invite proposals from potential resolution applicants. These applicants submit resolution plans, which the CoC reviews. The CoC must approve a resolution plan with a 66% majority vote. If the resolution plan is approved, it is submitted to the NCLT for final approval. If the plan is rejected, the company may be liquidated.

The resolution plan must satisfy the criteria laid down under the IBC, including:

• Ensuring the maximization of asset value.
• Ensuring that the interests of all stakeholders are adequately represented, including operational creditors.
• Providing a viable and feasible solution for the revival of the company.

5. Outcome of CIRP

The outcome of CIRP can be one of two:

• Resolution: If the CoC approves a resolution plan, the company is revived under the new ownership or management, and the debts are restructured as per the plan.
• Liquidation: If no resolution plan is approved within the statutory time limit or if the company’s viability is not proven, the company is liquidated. Liquidation proceeds are distributed to creditors based on a predefined waterfall mechanism, prioritizing secured creditors.

Key Amendments to the IBC

Since its enactment in 2016, the IBC has been amended multiple times to address emerging challenges and improve its functionality. Some of the significant amendments include:

• Introduction of Pre-Packaged Insolvency for MSMEs (2020): The pre-packaged insolvency process was introduced for Micro, Small, and Medium Enterprises (MSMEs), which allows for a quicker and more cost-effective resolution without the involvement of the CoC.
• Changes to the Voting Threshold: The voting threshold for approving a resolution plan was raised in certain cases to ensure that decisions are taken with wider consensus.
• Extension of the Insolvency Period: In response to the COVID-19 pandemic, the IBC timelines were extended, and certain provisions were temporarily suspended to accommodate the extraordinary circumstances.

III. Operational mechanism and stakeholder roles

The operational mechanism of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016, is designed to ensure a time-bound and structured resolution of corporate insolvency. This chapter discusses the key elements of the CIRP, the various stakeholders involved, and their roles in the process. The aim is to provide a comprehensive understanding of how the CIRP functions, the responsibilities of each stakeholder, and the critical factors that influence the success of the resolution process.

1. Initiation of the CIRP

The initiation of the CIRP is the first step in the insolvency resolution process and can be triggered by three parties:

• Financial Creditors: Financial creditors are the most common initiators of CIRP. These include banks, financial institutions, or any other entities to whom the debtor owes a financial debt. Under the IBC, a financial creditor can initiate the CIRP by filing an application before the National Company Law Tribunal (NCLT) if the debtor has defaulted on a financial debt of at least ₹1 crore. Financial creditors have significant influence in the insolvency process as they hold the largest share of the debt.
• Operational Creditors: Operational creditors, such as suppliers or service providers, can also initiate the CIRP if they have not been paid for goods or services rendered. Operational creditors are required to issue a demand notice before filing a petition with the NCLT. However, operational creditors have a relatively weaker position in the resolution process compared to financial creditors, especially when it comes to voting rights and decision-making.
• Corporate Debtor: The corporate debtor itself can voluntarily initiate the CIRP under Section 10 of the IBC if it acknowledges its inability to pay debts and seeks resolution. This is often done when the debtor seeks a fresh start by restructuring its debt and resolving its financial issues. Initiating CIRP voluntarily is also an indication of the company’s willingness to cooperate in the process and offer transparency.

Once an application is filed by any of the creditors or the debtor itself, the NCLT has a maximum of 14 days to admit or reject the application based on the merit of the claim. If the NCLT admits the application, the moratorium period begins, which prohibits creditors from taking legal actions against the company during the resolution process.

2. Appointment of Resolution Professional (RP)

Once the CIRP is initiated, the NCLT appoints an Interim Resolution Professional (IRP), who takes charge of managing the affairs of the corporate debtor. The role of the IRP is crucial because it marks the beginning of the operational transition from the management of the company to the insolvency process. The IRP is responsible for conducting the day-to-day activities of the debtor, securing its assets, and ensuring that the company’s operations continue without disruption, if feasible.

The Resolution Professional (RP), once appointed, assumes control of the debtor's operations and plays an integral role in managing the insolvency process. The RP must act in the best interests of the creditors while adhering to the timelines set by the IBC. One of the primary functions of the RP is to constitute the Committee of Creditors (CoC), as discussed below.

3. Moratorium Period and Protection Against Creditors

Once the CIRP is initiated and the application is accepted by the NCLT, the debtor company benefits from a moratorium period that lasts for 180 days, extendable by an additional 90 days. The moratorium is a key feature of the IBC, as it provides temporary relief to the distressed company by prohibiting:

• The initiation of suits or proceedings against the debtor.
• The transfer, disposal, or encumbrance of the debtor’s assets.
• Any recovery action by creditors, including repossession of goods or property by secured creditors.

This period is meant to allow the company to focus on restructuring its operations and formulating a resolution plan. It prevents the aggressive actions of creditors that could destabilize the company further, and gives the RP time to assess the company’s financial position.

However, the moratorium does not apply to certain types of claims, such as employee dues, which must be paid during the CIRP process. Similarly, the continuation of essential services like electricity and water is also protected during the moratorium.

4. Committee of Creditors (CoC)

One of the most important features of the IBC is the creation of the Committee of Creditors (CoC), which consists of financial creditors of the corporate debtor. The CoC is tasked with making critical decisions about the resolution process, including approving the resolution plans submitted by potential resolution applicants. The CoC is composed of representatives of all financial creditors and holds significant power in the insolvency process.

Key roles and responsibilities of the CoC include:

• Evaluating and Approving Resolution Plans: The CoC evaluates and approves or rejects the resolution plans submitted by interested parties. A resolution plan can only be approved if it is passed by at least 66% of the CoC members. The CoC’s commercial wisdom is paramount in determining the suitability of a resolution plan.
• Monitoring the Process: The CoC works closely with the Resolution Professional to ensure that the CIRP is being conducted in accordance with the IBC and the interests of creditors are protected. The CoC meets regularly to discuss the progress of the process and provides input on the operational decisions of the RP.
• Decision-making on Liquidation: If the CoC is unable to approve a resolution plan within the stipulated timeline or if no resolution plan is found viable, the CoC has the authority to recommend liquidation of the debtor company.

The decision-making power of the CoC is a significant feature of the IBC. The CoC serves as the voice of the creditors and provides a platform for them to assert their interests in the resolution process. However, the 66% majority voting requirement can sometimes result in delays or disagreements within the CoC, especially if different creditor groups (e.g., secured vs. unsecured creditors) have conflicting interests.

5. Resolution Plans and Stakeholder Engagement

The core objective of the CIRP is to find a resolution that addresses the distressed company’s financial problems and maximizes the value of its assets. To achieve this, the RP invites resolution plans from eligible applicants, which can include other companies, asset management firms, private equity investors, or any other parties with the capacity to turn around the distressed company.

A resolution plan is a proposal that outlines how the debtor’s debts will be restructured and how its operations will be managed post-resolution. The resolution plan should meet the following criteria:

• Maximization of Value: The plan should maximize the value of the debtor’s assets, as this benefits all stakeholders, including creditors, employees, and shareholders.
• Feasibility and Viability: The plan must be feasible and sustainable in the long term, with clear strategies for operational turnaround and debt repayment.
• Fairness to Creditors: The plan must be fair to all creditors, ensuring that their rights are protected according to the IBC’s prioritization scheme.

The CoC evaluates these plans based on these criteria, and the RP plays an instrumental role in assisting the CoC in evaluating the commercial viability and impact of the plans.

6. Role of the Judiciary: NCLT and NCLAT

The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) serve as the judicial arms of the CIRP process.

• NCLT: The NCLT is the principal adjudicating authority under the IBC. It is responsible for admitting or rejecting the insolvency petitions, appointing the IRP, and overseeing the resolution process. The NCLT also confirms the resolution plans approved by the CoC.
• NCLAT: The NCLAT is the appellate body, and any decisions made by the NCLT can be appealed before it. The NCLAT ensures that the process is conducted in accordance with the law and provides an avenue for parties to challenge the decisions made during the CIRP.

The NCLT and NCLAT together ensure that the CIRP is conducted in a legally sound and transparent manner, and their decisions are crucial in maintaining the integrity of the process.

7. Impact of Judicial Trends

The role of the judiciary in shaping the IBC process cannot be overstated. Over the years, the decisions of the Supreme Court of India and various High Courts have significantly impacted the way CIRP is conducted. Several key judicial interpretations have influenced the operation of CIRP, particularly in terms of:

• Time-bound nature: The judiciary has consistently reinforced the importance of adhering to the timelines stipulated by the IBC, emphasizing that the process should not be delayed without valid reasons.
• Commercial wisdom of the CoC: Courts have emphasized the primacy of the CoC’s commercial judgment in approving or rejecting resolution plans. Judicial intervention is limited unless there are substantial violations of the law or procedural fairness.
• Treatment of creditors: The judicial trend has evolved to focus on ensuring that the rights of creditors, especially financial creditors, are protected, while also maintaining fairness towards operational creditors.

IV. Efficiency of the cirp under ibc, 2016

The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016 was introduced with the primary goal of enhancing the efficiency of the corporate insolvency resolution process in India. Prior to the enactment of the IBC, India’s insolvency landscape was plagued with inefficiencies, delays, and fragmented laws. The IBC brought in a time-bound, creditor-driven framework that aimed to improve the resolution of distressed assets, protect creditors' interests, and promote the revival of companies in financial distress. This chapter explores the efficiency of the CIRP under the IBC, analyzing its strengths, weaknesses, and the evolving dynamics that impact its effectiveness.

1. The Time-bound Nature of CIRP

One of the most significant innovations of the IBC is the time-bound nature of the Corporate Insolvency Resolution Process. Before the enactment of the IBC, the resolution of distressed companies often involved protracted litigation that lasted for several years. In contrast, the CIRP mandates that the resolution process be completed within 180 days, with a possibility of a 90-day extension in exceptional cases.

The time-bound framework of CIRP was designed to ensure that insolvency proceedings do not drag on indefinitely, preventing the erosion of value in distressed assets. This is crucial because a prolonged resolution process often reduces the chances of revival and negatively impacts creditors’ recoveries. The implementation of strict timelines has led to a reduction in delays and a more predictable process, which has enhanced the overall efficiency of the insolvency resolution mechanism.

For instance, the introduction of time limits has forced parties involved in insolvency proceedings, including creditors, resolution applicants, and judicial authorities, to act more decisively and efficiently. It has also enhanced the ability of financial institutions and other stakeholders to assess distressed assets and make timely decisions regarding the potential for restructuring or liquidation.

2. Creditor-Driven Process and Maximization of Value

The IBC emphasizes a creditor-driven process, where the Committee of Creditors (CoC) plays a central role in decision-making. This creditor-centric approach is in stark contrast to the previous system, where the debtor had significant control over the insolvency process. Under the IBC, the CoC, primarily comprising financial creditors, makes decisions regarding the approval of resolution plans, ensuring that the interests of the creditors are adequately protected.

One of the key goals of the IBC is to maximize the value of the distressed company. By giving the CoC the power to approve or reject resolution plans, the IBC ensures that the resolution process is focused on enhancing the economic value of the debtor’s assets. This shift towards a market-driven process, wherein resolution plans are evaluated based on their ability to unlock value, has resulted in better outcomes for creditors and the revival of companies.

In many cases, the IBC has proven to be more successful in achieving higher recovery rates compared to the old system. As per reports from the Insolvency and Bankruptcy Board of India (IBBI), the recovery rate for creditors in insolvency proceedings under the IBC has been significantly higher compared to the previous insolvency laws.

3. The Role of Resolution Professionals (RPs)

The Resolution Professional (RP) plays a central role in the CIRP and is responsible for managing the day-to-day affairs of the distressed company during the resolution process. The RP is tasked with ensuring that the process is conducted smoothly and in accordance with the provisions of the IBC. The RP also acts as an intermediary between the debtor and creditors, facilitating the process of resolution and helping the CoC assess resolution plans.

The role of the RP is crucial for the efficiency of the CIRP, as they bring expertise in managing distressed assets and are responsible for evaluating potential resolution applicants. The RP’s independence and expertise in managing the process have enhanced the efficiency of CIRP by reducing the scope for delays and conflicts of interest.

The IBC requires the RP to be an insolvency professional who is licensed by the Insolvency and Bankruptcy Board of India (IBBI). This ensures that the RP is qualified to handle complex insolvency cases and brings a level of professionalism to the process. The RP’s actions are closely monitored by the CoC, and they are also required to provide regular updates to the NCLT on the progress of the resolution process.

By entrusting the RP with the responsibility of managing the debtor company’s operations, the IBC ensures that the resolution process remains focused on recovering value, protecting creditors' interests, and resolving the insolvency in a transparent and efficient manner.

4. Impact of the Moratorium

The moratorium period, which is a key feature of the CIRP, serves as an essential tool to enhance the efficiency of the process. Once the CIRP is initiated, a moratorium is imposed, preventing creditors from initiating any recovery actions against the company. This provides the company with the time and space it needs to either work on a resolution plan or prepare for liquidation. The moratorium period gives the debtor the opportunity to restructure its business, negotiate with creditors, and evaluate potential buyers without the constant pressure of legal actions from creditors.

By offering this temporary relief, the moratorium allows for the stabilization of the debtor’s operations and the protection of its assets. This prevents a scenario where creditors compete against each other in an attempt to recover dues, which could otherwise result in asset stripping and further deterioration in the company’s value.

While the moratorium is beneficial in ensuring that the resolution process is not derailed by creditor actions, it has also faced criticism in certain cases where operational creditors, particularly smaller vendors, are left without payment for extended periods. Balancing the interests of all creditors while maintaining the integrity of the moratorium period remains a challenge for the CIRP process.

5. Challenges and Efficiency Bottlenecks

Despite the significant improvements in the efficiency of insolvency resolution under the IBC, several challenges and inefficiencies continue to hinder the process. These challenges include:

• Delays in the Resolution Process: Although the IBC mandates a time-bound resolution, delays in the CIRP process are still a major issue. The process often exceeds the prescribed 180-day limit, and in many cases, the 90-day extension is also exhausted. One of the main reasons for these delays is the lack of infrastructure and capacity in the National Company Law Tribunal (NCLT), which is responsible for hearing and deciding on insolvency petitions. The large number of pending cases and the shortage of specialized judicial resources contribute to delays in the process.
• Conflicting Interests Among Creditors: The CoC is comprised of different types of creditors, such as secured creditors, unsecured creditors, and operational creditors, each with its own set of interests and priorities. The conflict among creditors can lead to delays in decision-making and a lack of consensus on critical issues such as the approval of resolution plans. Secured creditors, in particular, have significant bargaining power, which may result in an outcome that disproportionately benefits them at the expense of other creditors.
• Corporate Governance Issues: In certain cases, the company’s management, especially in large corporate groups, may resist the insolvency process due to concerns over loss of control. This resistance can lead to delays in the initiation of the CIRP, challenges in the appointment of resolution professionals, and difficulties in formulating a resolution plan that meets the needs of creditors. The resolution process may also be complicated if there are issues with the company's governance or if the company is part of a complex group structure.
• Judicial Delays and Backlog of Cases: The inefficiency of the judicial system in handling insolvency cases has been a significant issue. The NCLT and NCLAT have faced an increasing number of cases, leading to delays in adjudicating insolvency matters. While judicial efficiency has improved over time, the sheer volume of cases and the need for specialized tribunals remain a bottleneck in the overall efficiency of the CIRP.
• Difficulties in Identifying Suitable Resolution Applicants: In some cases, identifying suitable resolution applicants who are capable of turning around a distressed company has been challenging. The lack of skilled resolution applicants, especially for companies in distressed sectors, limits the effectiveness of the CIRP. The process can be further delayed if resolution applicants withdraw their plans or fail to submit viable proposals.

6. Measures to Improve Efficiency

To address the challenges and improve the efficiency of the CIRP, the following measures can be considered:

• Increasing the Capacity of NCLT and NCLAT: One of the most effective ways to reduce delays in the CIRP process is to increase the capacity of the NCLT and NCLAT. This can be done by appointing additional benches, increasing the number of judges, and improving the overall infrastructure of these tribunals.
• Streamlining the CoC Process: To address the issue of conflicting interests among creditors, the process of forming the CoC and decision-making could be streamlined. One approach could be to enhance the representation of operational creditors and ensure their interests are adequately considered.
• Amending the Moratorium Provisions: While the moratorium has been effective in protecting the company from creditor actions, further amendments may be needed to address the concerns of operational creditors who face significant losses during the resolution process. A balance should be struck to protect the interests of all creditors while maintaining the stability of the resolution process.

V. Conclusion

The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016 has undeniably transformed India’s insolvency landscape, making it more efficient, transparent, and responsive. The primary objectives of the IBC—ensuring a time-bound resolution of corporate distress, protecting the interests of creditors, and enhancing the value of distressed assets—have largely been achieved through the structured and disciplined framework provided by the code. However, as with any complex legal framework, the CIRP under the IBC faces certain challenges that hinder its full potential.

The time-bound nature of the CIRP is one of its greatest strengths, as it ensures that insolvency proceedings are not protracted, offering a clear resolution path for stakeholders. The maximum timeline of 180 days (with an extension of 90 days) helps maintain the momentum of the resolution process, reducing the risk of value erosion due to delays. This time-bound approach promotes greater accountability and efficiency among stakeholders, including creditors, resolution professionals (RPs), and judicial authorities.

One of the most significant outcomes of the IBC is the creditor-driven process, where the Committee of Creditors (CoC) plays a pivotal role in shaping the outcome of the insolvency proceedings. By giving financial creditors the power to approve or reject resolution plans, the IBC ensures that the interests of creditors are prioritized. This approach has resulted in a higher recovery rate for creditors, compared to the previous insolvency regime, and has also facilitated the revival of distressed companies, which might have otherwise gone into liquidation. The emphasis on maximizing the value of the distressed assets also promotes market-driven outcomes that benefit the economy as a whole.

The role of Resolution Professionals (RPs) further enhances the efficiency of the CIRP. By assuming control of the company during the insolvency process, RPs ensure that the day-to-day operations continue and that the process adheres to the provisions of the IBC. Their expertise and neutral position help maintain fairness and transparency throughout the proceedings, instilling confidence among creditors, investors, and other stakeholders.

However, despite these strengths, the CIRP is not without its challenges. Delays in the resolution process, often caused by overloaded tribunals like the National Company Law Tribunal (NCLT), continue to undermine the timeliness of the process. The sheer volume of cases and the lack of sufficient judicial infrastructure have led to prolonged hearings, which hinder the effectiveness of the IBC’s time-bound framework. Additionally, the conflicting interests among different creditor classes, particularly secured and unsecured creditors, often result in deadlocks and delays in decision-making, affecting the overall speed of the process.

Moreover, the moratorium period, while designed to protect the distressed company from creditor actions, has created tensions, particularly with operational creditors, who often face significant payment delays. These issues need to be addressed through potential amendments to the IBC, which could better balance the interests of different stakeholders without compromising the core objectives of the code.

Another area that needs attention is the liquidation process. In certain cases, if a viable resolution plan is not found within the stipulated timeframe, companies are forced into liquidation. The liquidation process, while providing a clear exit for creditors, often results in the closure of businesses that could have been revived with better restructuring. Finding a middle ground between liquidation and resolution remains an ongoing challenge.

Looking ahead, reforms in judicial infrastructure, streamlining decision-making within the CoC, and better protection for operational creditors are essential to improving the overall efficiency of the CIRP. Additionally, increasing the participation of diverse resolution applicants, particularly those with the expertise to manage distressed businesses, would help maximize the potential of the IBC.

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Footnotes

1. Author is a LL.M. Student at School of Law, GD Goenka University, Haryana, India.