The Insolvency and Bankruptcy Code, 2016 (IBC) is a comprehensive Act of the Indian Parliament that consolidates and amends laws relating to the reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. The Code was enacted on May 28, 2016, as Act No. 31 of 2016, after being introduced by Finance Minister Arun Jaitley.
The IBC was created to solve the problem of a fragmented and inefficient insolvency framework that was scattered across multiple laws, such as the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), which led to significant delays and poor recovery of bad debts. Its primary objective is to maximize the value of assets, promote entrepreneurship, and balance the interests of all stakeholders by providing a structured process for resolving financial distress.
The core mechanism for companies is the Corporate Insolvency Resolution Process (CIRP), which is initiated before the National Company Law Tribunal (NCLT). A key provision is the declaration of a moratorium under Section 14 upon the commencement of the CIRP, which restricts specified legal proceedings and actions against the corporate debtor. The process is managed by an Insolvency Professional (IP) and overseen by a Committee of Creditors (CoC), which makes commercial decisions, including the approval of a resolution plan. The Code mandates a time-bound resolution, with the process for companies originally set at 180 days, extendable by 90 days.
The IBC is connected to the Insolvency and Bankruptcy Board of India (IBBI), which was established as the regulatory authority to oversee the insolvency process and regulate the entities involved. It also connects to the National Company Law Appellate Tribunal (NCLAT), which hears appeals from the NCLT. The Code has an overriding effect on other laws, and it repealed older statutes like the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920.
The Code has undergone significant changes, including the introduction of the pre-packaged insolvency resolution process (PPIRP) for Micro, Small, and Medium Enterprises (MSMEs) through the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021. More recently, the Insolvency and Bankruptcy Code (Amendment) Act, 2026, expanded the PPIRP framework beyond MSMEs and introduced major changes to the CIRP. The fundamental structure of a time-bound, creditor-driven resolution process, however, remains the same.