The Insolvency and Bankruptcy Code, 2016 (IBC) is a comprehensive Act of the Indian Parliament that consolidates and amends laws relating to the reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. The Code was enacted to solve the problem of a fragmented legal framework and prolonged litigation, which resulted in low debt recovery and a growing burden of Non-Performing Assets (NPAs). The IBC was introduced in the Lok Sabha in December 2015 and received the President's assent on May 28, 2016. It replaced multiple laws, including the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), which was repealed.
The core mechanism for companies is the Corporate Insolvency Resolution Process (CIRP), which is triggered when a default of at least ₹1 crore occurs. Once the Adjudicating Authority, the National Company Law Tribunal (NCLT), admits the application under Section 7 (Financial Creditor), Section 9 (Operational Creditor), or Section 10 (Corporate Debtor), a moratorium is declared, and the management's power shifts to a Committee of Creditors (CoC). The CoC, comprising financial creditors, must approve a resolution plan by a 66% majority within a maximum of 330 days, including any litigation period, to revive the company. If no plan is approved, the company proceeds to liquidation.
The IBC is supported by an institutional framework, including the Insolvency and Bankruptcy Board of India (IBBI), which acts as the regulator. The Debt Recovery Tribunal (DRT) handles insolvency for individuals and partnership firms. A landmark judgment, Swiss Ribbons Pvt. Ltd. v. Union of India (2019), upheld the constitutional validity of the IBC. The Code has seen significant amendments, such as the Insolvency and Bankruptcy Code (Amendment) Act, 2019, which mandated the 330-day time limit and upgraded homebuyers to the status of Financial Creditors. More recently, the Insolvency and Bankruptcy Code (Amendment) Act, 2026 introduced a new creditor-initiated resolution mechanism and provisions for cross-border insolvency.