The Insolvency and Bankruptcy Code, 2016 (IBC) was enacted as a comprehensive legal framework to address the inefficiencies and delays that characterized India’s earlier insolvency regime. Designed to consolidate multiple fragmented laws into a unified system, the Code seeks to ensure the timely resolution of insolvency, maximize the value of distressed assets, and balance the interests of creditors and debtors while promoting ease of doing business. The legislation was passed by Parliament in May 2016 and brought into force in a phased manner, with certain provisions—particularly those relating to individuals and partnership firms—yet to be fully implemented.

Prior to the IBC, India’s insolvency framework was governed by a patchwork of laws, including the Sick Industrial Companies (Special Provisions) Act, 1985, the Companies Act, the SARFAESI Act, and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. These laws often resulted in prolonged litigation, jurisdictional overlaps, and debtor-friendly outcomes, thereby hindering effective debt recovery and resolution. The failure of these mechanisms and the need for a time-bound, creditor-driven process led to the establishment of the Bankruptcy Law Reform Committee, which ultimately shaped the IBC.