INTRODUCTION
The Insolvency and Bankruptcy Code, 2016 (IBC), was enacted with the primary objective of consolidating and amending the laws relating to the reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. Since its inception, the IBC has significantly changed India’s credit culture by shifting from a debtor-in-possession to a creditor-in-control model.[1]
As of 2026, the Code has completed nearly a decade of implementation. While it has achieved notable success in improving recovery rates and reducing non-performing assets, the Corporate Insolvency Resolution Process (CIRP) continues to face several operational and legal challenges. Delays in resolution, high haircuts, and increasing litigation have raised concerns about the efficiency of the process.[2]
The judiciary, particularly the Supreme Court and National Company Law Tribunals (NCLTs), has played a pivotal role in interpreting and refining the provisions of the IBC.[3] Recent judgements in 2025–2026 have addressed critical issues such as the admission of applications under Section 7, timelines for CIRP, treatment of government dues, and the rights of homebuyers and operational creditors.
This blog analyses the recent judicial trends in corporate insolvency resolution under the IBC during 2025–2026. It examines key judicial pronouncements, identifies persistent challenges in the resolution process, and suggests measures required to strengthen the IBC framework for more effective and time-bound resolutions.
UNDERSTANDING THE INSOLVENCY AND BANKRUPTCY CODE
The Insolvency and Bankruptcy Code, 2016 (IBC) represents a landmark reform in India’s insolvency regime.[4] Prior to the IBC, multiple overlapping laws such as the Companies Act, SARFAESI Act, and Provincial Insolvency Act created a highly fragmented and inefficient recovery mechanism. The IBC consolidated these laws and introduced a time-bound, creditor-driven insolvency resolution process.
The Corporate Insolvency Resolution Process (CIRP) under the IBC is initiated when a corporate debtor defaults on a debt of ₹1 crore or more. Financial creditors can file an application under Section 7, operational creditors under Section 9, and the corporate debtor itself under Section 10. Upon admission by the National Company Law Tribunal (NCLT), a moratorium is imposed under Section 14, an Interim Resolution Professional (IRP) is appointed, and a Committee of Creditors (CoC) is constituted.
The primary objective of CIRP is to find a resolution applicant who can take over the corporate debtor as a going concern, thereby maximising the value of assets and preserving jobs. If no resolution plan is approved within the stipulated timeline (initially 180 days, extendable up to 330 days), the corporate debtor proceeds to liquidation under Section 33. The Insolvency and Bankruptcy Board of India (IBBI) regulates the professionals and processes under the Code. Over the years, several amendments have been introduced to address practical difficulties, including the 2020 amendment for pre-packaged insolvency and subsequent changes to strengthen the resolution process.
While the IBC has significantly improved recovery rates compared to the earlier regime, the increasing complexity of cases, especially involving large conglomerates, real estate projects, and cross-border insolvency, has tested the robustness of the framework.
LEGAL FRAMEWORK AND RECENT AMENDMENTS
The Insolvency and Bankruptcy Code, 2016, is a dynamic legislation that has undergone multiple amendments to address emerging challenges and improve its effectiveness. The Code is supplemented by rules and regulations framed by the Insolvency and Bankruptcy Board of India (IBBI).[5]
Key amendments in recent years include the Insolvency and Bankruptcy Code (Amendment) Act, 2020, which introduced the Pre-Packaged Insolvency Resolution Process (Pre-Pack) for MSMEs. Subsequent amendments and regulations have focused on streamlining the CIRP timeline, enhancing transparency in the resolution process, and strengthening the rights of stakeholders.
Notable regulatory developments between 2024 and 2026 include stricter timelines for submission of resolution plans, mandatory disclosure of conflicts of interest by resolution professionals, and improved mechanisms for dealing with avoidance transactions. The IBBI has also issued regulations to facilitate faster resolution of real estate projects and group insolvency cases.
The framework empowers the Adjudicating Authority (NCLT) to oversee the process while the Appellate Authority (NCLAT) and the Supreme Court provide judicial oversight. This multi-layered structure aims to balance speed with fairness in the resolution process.
However, despite these amendments, several practical and interpretational issues continue to arise, leading to frequent litigation and delays in the resolution process.
RECENT JUDICIAL TRENDS (2025–2026)
The Supreme Court and NCLAT have continued to play a significant role in shaping the interpretation of the IBC through several important judgements in 2025–2026.
In a series of rulings, the Supreme Court has emphasised strict adherence to timelines in the Corporate Insolvency Resolution Process (CIRP). The Court has reiterated that extensions beyond the statutory limit of 330 days should be granted only in exceptional circumstances. This trend reflects the judiciary’s growing concern over prolonged insolvency proceedings that erode the value of stressed assets.[6]
The Court has also clarified the position regarding government dues and statutory authorities. In recent decisions, it has held that government dues are to be treated as operational debt and cannot claim priority over secured financial creditors in the distribution waterfall under Section 53, except in cases of liquidation.
Another important area of judicial intervention has been the rights of homebuyers and allottees in real estate insolvency cases. The Supreme Court and NCLAT have delivered nuanced judgements balancing the interests of homebuyers with those of financial institutions, while stressing the need for time-bound resolution of real estate projects.
Furthermore, the judiciary has addressed issues relating to the approval of resolution plans, particularly regarding the treatment of dissenting financial creditors and the inclusion of contingent liabilities. The Court has upheld the commercial wisdom of the Committee of Creditors (CoC) while maintaining judicial review on limited grounds.
These recent trends indicate a maturing jurisprudence that seeks to strengthen the creditor-driven nature of the IBC while addressing practical challenges in implementation.
KEY CHALLENGES IN CORPORATE RESOLUTION PROCESSES
Despite significant judicial guidance and amendments, the Corporate Insolvency Resolution Process under the IBC continues to face several structural and operational challenges as of 2026.
One of the most persistent issues is delay in resolution. Although the Code prescribes a timeline of 330 days, many large and complex cases exceed this limit due to frequent litigation, multiple rounds of plan submission, and procedural complexities. Prolonged CIRP leads to value erosion of assets and reduced recovery for creditors.
Another major challenge is the low recovery rate in several sectors, particularly real estate and manufacturing. High haircuts (often exceeding 70-80% in some cases) have raised concerns about the effectiveness of the resolution mechanism and its impact on credit markets.
The treatment of operational creditors and other stakeholders remains contentious. While the Supreme Court has provided clarity on certain issues, operational creditors often receive minimal or no recovery, leading to dissatisfaction and further litigation. Similarly, issues relating to group insolvency, cross-border insolvency, and resolution of interconnected entities continue to pose practical difficulties.
Additionally, lack of adequate infrastructure at NCLTs, shortage of qualified resolution professionals for large cases, and information asymmetry during the resolution process further hinder efficient outcomes. The increasing number of cases involving MSMEs and personal guarantors has also stretched the existing framework.
These challenges highlight that while the IBC has transformed India’s insolvency landscape, there is still significant scope for improvement in its practical implementation.
WAY FORWARD
To strengthen the corporate resolution process, the following measures are recommended:
- Strict enforcement of CIRP timelines with limited and well-defined grounds for extension.
- Further streamlining of group insolvency and cross-border insolvency frameworks.
- Greater institutional capacity building at NCLTs and NCLAT, including appointment of more technical members and digitisation of processes.
- Enhanced role of IBBI in capacity building of resolution professionals and continuous monitoring of resolution outcomes.
- Better balance between the rights of financial creditors, operational creditors, and other stakeholders.
The success of the IBC ultimately depends on its ability to deliver time-bound resolutions while maximising asset value. With targeted reforms and continued judicial support, the Code can evolve into a more efficient and effective mechanism for corporate revival and debt recovery in India.
CONCLUSION
The Insolvency and Bankruptcy Code, 2016, has undoubtedly been one of the most transformative economic legislations in India.[7] In the period 2025–2026, judicial trends have shown a clear inclination towards strengthening the creditor-driven process, enforcing timelines, and protecting the commercial wisdom of the Committee of Creditors. However, persistent challenges such as delays, low recovery rates, and infrastructural bottlenecks continue to undermine the full potential of the Code.
While the judiciary has filled many legislative gaps through progressive interpretations, over-reliance on courts for routine procedural matters indicates deeper systemic issues. The increasing complexity of cases involving real estate, group companies, and cross-border elements requires a more robust and adaptive framework.
Author(s) Name: Vaishnavi Karape (Savitribai Phule Pune University)
References:
[1] Insolvency and Bankruptcy Code 2016, Statement of Objects and Reasons
[2] ‘Quarterly Newsletter for January–March, 2026’ (Insolvency and Bankruptcy Board of India) <https://ibbi.gov.in/publication> accessed 07 June 2026
[3] Swiss Ribbons Pvt Ltd and Anr v Union of India and Ors (2019) 4 SCC 17
[4] Insolvency and Bankruptcy Code 2016, ss 7, 9, 10, 14 and 33
[5] Insolvency and Bankruptcy Code (Amendment) Act 2020
[6] Committee of Creditors of Essar Steel v Satish Kumar Gupta and Ors (2019) 16 SCR 275
[7] Report of the Bankruptcy Law Reforms Committee (2015).