The Insolvency and Bankruptcy Code (IBC), 2016, is an Act of the Indian Parliament (Act No. 31 of 2016) that provides a consolidated, time-bound framework for resolving the insolvency of corporate persons, partnership firms, and individuals. It was enacted on May 28, 2016, based on the recommendations of the T.K. Vishwanathan Committee Report. The Code was introduced to solve the problem of a fragmented legal system, which included multiple, slow-moving laws like the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), leading to low debt recovery and prolonged delays.
The core mechanism for companies is the Corporate Insolvency Resolution Process (CIRP), which must be completed within a maximum of 330 days. Upon default, control shifts from the debtor's management to a Committee of Creditors (CoC), reflecting a shift from a 'Debtor in possession' to a 'Creditor in possession' concept. A moratorium is immediately declared, barring new litigation against the corporate debtor. The process is overseen by an Insolvency Resolution Professional (IRP) and adjudicated by the National Company Law Tribunal (NCLT) for companies.
The Code established the Insolvency and Bankruptcy Board of India (IBBI) as the regulator. It replaced the repealed SICA, 1985, and consolidated provisions from other laws like the Companies Act, 2013. A significant amendment in 2020 increased the minimum default threshold for initiating CIRP under Section 4 from ₹1 lakh to ₹1 crore. The Supreme Court, in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. (2019), ruled that the Adjudicating Authority may extend the CIRP period beyond 330 days in exceptional cases.