Delays In Corporate Insolvency Resolution Process: Has the IBC Met Its Purpose?

The efficacy of the corporate environment in a country is measured not only by the ease at which businesses are allowed to flourish in the market but also by the efficiency of the mechanisms that allow businesses to take an exit from the market with minimum loss to the creditors. In India there had been various legal mechanisms that allowed such an exit to corporate entities for many decades. But the fact that there was a need for a complete overhaul of the insolvency resolution mechanism speaks clearly about the performance of the earlier legislations. The Report of The Bankruptcy Law Reforms Committee states that despite many reforms, the credit mechanism has always failed in the country. The main reason for this failure is ineffective insolvency resolution mechanisms. Therefore in order to bring dramatic changes, the Insolvency and Bankruptcy Code was enacted in 2016. The two main objectives of the Code were, less time for insolvency resolution and higher rate of recovery for the creditors. This paper analyzes whether the IBC has come to realize its objectives in over five and a half years of its existence. The relevant data shows that the timelines provided in the Code and it subsequent regulations have not been adhered to in their entirety. This has resulted in loss of value of the assets of the debtor resulting in low recovery rates. On the other hand, data also shows that despite the flaws, IBC is evolving and actively trying to adapt to the market conditions. This fuels the belief that IBC will surely be able to meet its objectives in the near future.