In 2023-24, the average time taken for a resolution was 716 days with the percentage of

realisable amount to admitted claims at 27 per cent, as per the data provided by Minister of
State for Corporate Affairs Harsh Malhotra in a written reply.

It also showed that in 2022-23, the average time taken was 654 days and the percentage of
realisable amount compared to admitted claims was at 36 per cent.

The government has amended the IBC, which came into force in 2016, six times.

"
8.4 -Monitor the Performance
The present study has examined the provisions of the Code as well the provisions of certain
foreign laws with regard to insolvency and bankruptcy and various judgments connected to
the aforesaid, in order to fulfil the research objectives as set out in the introduction. The
present conclusion discusses the core findings arrived at in the study. Thereafter, the various
suggestions for streamlining and improving the Code as discussed in the previous chapters
are brought forth and summarised.

FINDINGS OF THE PRESENT STUDY

The present research has discussed in chapters II and III the procedure with regard to
insolvency resolution process. In case of individual debtors and corporations, at the initial
stage an attempt is made for the resolution of the debt with consent of ―creditors and only in
the failure of such an endeavour, is liquidation or bankruptcy initiated against the debtor. The
analysis of the provisions of the Code has revealed that while it is a groundbreaking statute
which has already caused a sea change in the relationship between debtors and creditors,
certain defects still exist which need to be rectified. It has been found that the distinction
created under the Code for various types of ―creditors‖ and the overwhelming preference
shown to financial creditors in the case of CIRP, has resulted in the erosion of rights of other
creditors such as operational creditors. Thereby, there is an urgent need to introduce
safeguards for ―creditors‖ apart from financial creditors as discussed in the previous
chapters. In the case of liquidation of debtor corporations as well as insolvency and
bankruptcy of individuals, the treatment meted out to various categories of creditors is more
balanced. With regard to the fast track process as envisaged under the Code, it has been
found that the fast track process is not streamlined and does not show sufficient variation
from the normal CIRP so as to increase the possibility of achieving the goal of quick
resolution of debt and therefore, the fast track process needs to be further streamlined.
Timelines under ―the Code‖ are not being met. The same is a result of a variety of factors
including lack of judicial infrastructure, frivolous litigation etc. It has also been found that
while the Code is effective at recovering debts ―resolution‖ is successful in the CIRP but
when liquidation of the debtor corporation occurs, minimal recoveries are received by the
creditors of the debtor corporation. However, it has also been found that liquidation of the
debtor corporation is at least as likely as resolution of debt of the debtor corporation. High
rate of liquidation under the Code goes against the objective of rescue of the debtor
corporation as well as the greater recovery of debts by creditors. The relevant ―insolvency‖
statutes of the ―U.SA.‖, ―U.K.‖ and ―Canada‖ have also been analysed to determine
possible improvements to the legal framework under the Code considering the Indian
scenario in chapter 4 of the present study. Furthermore, judicial pronouncements with regard
to insolvency have been reviewed and analysed and it has been found that more must be done
by the judicial fora to protect stakeholder‘s interests. From the aforesaid discussion, the two
hypotheses i.e., Hypothesis A which is as follows ―That the present Insolvency and
Bankruptcy Code, 2016 does not sufficiently ensure and safeguard the rights of all the
creditors of the insolvent entity‖ and Hypothesis B which is as follows ―B. That the present
Insolvency and Bankruptcy Code, 2016 does not sufficiently protect the rights of the
bankrupt entity‖ stand proved. Considering the high rate of liquidation of debtor corporations,
the rights of neither the ―creditors‖ nor the bankrupt entity are protected as liquidation is
beneficial to neither of the aforesaid category of persons. Liquidation may result in the
bankrupt entity being dissolved and will result in job losses to the employees of the bankrupt
entity and furthermore, as previously, liquidation results in much lower recoveries for
creditors. Furthermore, as discussed in the previous chapters, the rights of all the stakeholders
are not sufficiently safeguarded including the creditors particularly creditors who don't fit the
definition of financial creditors as well as the bankrupt individual ―debtor‖ or a liquidated
debtor corporation whose rights have been excessively diminished. No distinction has been
made under the Code between insolvent or bankrupt entities who have been rendered
insolvent or bankrupt due to circumstances beyond their control despite their sincere efforts
and insolvent or bankrupt entities who have been rendered insolvent or bankrupt due to
negligence or fraudulent activities. Even those debtors who suffered genuine business failures
have their rights similarly and harshly diminished as those who are guilty of negligence or
fraud. Therefore, it is humbly submitted that the two hypotheses framed under the present
study stand approved. Along with the discussion in the previous chapters, various suggestions
to improve the legal framework with regard to insolvency have been suggested that the same
are summarised and consolidated in the subsequent section as follows.

SUGGESTIONS WITH REGARD TO THE INSOLVENCY AND BANKRUPTCY

CODE, 2016

From chapters II to V, various aspects of the Code have been discussed and various
suggestions to improve the insolvency framework have been made. In the present section, the
aforesaid suggestions are consolidated and summarised as follows:
One of the major drawbacks in the insolvency and bankruptcy processes is the delay in
resolving litigations due to the fact of lack of adequate judicial structure and failure to
appoint the members of AAs in a timely fashion.

i. One of the major delays in ―insolvency and ―bankruptcy processes is delay in

resolving litigation due to lack of adequate judicial structure and failure to appoint
the members of the AAs in a timely fashion. If the timelines under the Code are to be
adhered to which, is essential, to maximise a debtor‘s value, the judicial
infrastructure must be strengthened and must not be allowed to wither away. The
sanctioned strength of the members of the AAs must be maintained at all times and
prior to the retirement of any member, the recruitment process should already be
initiated so that at most, within two weeks of the retirement of the member, a
replacement is appointed. Furthermore, the AAs must be encouraged to record
reasons for delay in adjudication beyond the timelines specified under the Code
mandatorily to reduce frivolous delays and to ensure transparency. Another aspect
with regard to judicial delays is the fact that the regard to the NCLAT and the NCLTs
which are the AAs with regard to debtor corporations, the aforesaid tribunals are
burdened with various non-insolvency matters which increases the burden on the
aforesaid tribunals. Thereby, the NCLAT and the NCLTs should be solely vested
with insolvency matters and other matters such as 284 matters with regard to
Companies Act, 2013, and the Competition Act, 2002, should be transferred to
dedicated tribunals setup for such purpose.
ii. Non-cooperation by the debtor or their employees should be discouraged by
empowering the AAs to impose heavy fines for each day of delay caused by such
wilful non-cooperation by the debtor or their employees.
iii. A period of limitation should be provided for challenging the sanction of a
―resolution plan‖. In the present scenario, in the time taken by the AAs to decide the
sanction of a ―resolution plan, more objections are filed while the resolution plan is
pending approval which further delays the process.
iv. Duplication of effort under the insolvency and bankruptcy process should be avoided.
For example, the IRP authenticates ―claims of ―creditors during CIRP but during a
 liquidation process, the entire claim submission process is initiated from scratch. The
liquidator should carry on with the liquidation process with the claims of the creditors
as verified by the IRP and the RP unless any claim is objected to or is sought to be
rectified by any party or by the liquidator suo moto.
v. v. Compromise or arrangement can also take place during the liquidation process of
the debtor corporation. However, such process, if feasible, should be conducted
parallelly with the preliminary stages of the liquidation process such as constitution
of stakeholders committee etc. and the liquidation process should not be stayed
simply for the reason of existence of a proposal for compromise or arrangement
subject to no assets being sold during the liquidation process unless the proposal for
compromise or arrangement is rejected or is deemed to be not feasible. The timeline
of 90 days for conduct
What are the shortcomings?

 The code fails to provide adequate safeguards to protect the rights of the company
before handing over the management to the resolution professional.
 The Code rides substantially on the unquestionable word of the creditors.
 The Code fails to provide any opportunity to the corporate debtor to make a
representation at any stage of the resolution process.
 The Code is also deficient in providing criteria for the qualification of the interim and
of the final insolvency resolution professionals.
 It also leaves too much discretion in the hands of the IP.
 It allows for any person to access the information memorandum put together by the
insolvency professional without restricting competitors or imposing
any confidentiality obligations.
 This goes against the right to business.
 The Code fails to define a resolution applicant. All such resolution plans are placed
before the financial creditors and is implemented by way of an order by the NCLT.
 If the financial creditors fail to arrive at a consensus, the default plan is to liquidate
the company.
 The Code prohibits withdrawal of the application once it has been admitted. This
means that there is no scope for settlement.

What could be done?

 The code must be robust, decentralized, less costly, inclusive and speedy.
 This would help businesses exit sooner and capital to be redeployed faster to
productive firms, thereby improving economic output and employment.
 The code should encourage decentralization, reduce the role of courts or insolvency
professionals and allow for a greater role for a market-friendly approach.
 The Government of India in the month of May, 2016 came up with the revised and
amended Insolvency and Bankruptcy Code for the country. It was aimed at easing the
process of money recollection from financial and operational creditors in a timely
manner. In simpler terms the IBC, 2016 was implemented to increase the ease of
doing business in India. But the three years life of the act has highlighted various
loopholes which makes it stand against its very own sole principal. The code by its
language and application seems to very centralized, exclusive and slow. Periodic
reinterpretations of the law has also made the mechanism of money extraction from
non-profitable businesses slower. The code also lacks certain fundamental properties.
The code does not define any safeguard to the rights of the company before it hands
over its management to the resolution professional. The code also puts excessive and
unjustified trust on the words of the creditor. It also denies the corporate debtor to
represent himself at any time during the resolution process. The IBC, 2016 also lacks
grounds when it comes to defining the criteria for the qualification of the interim and
of the final insolvency resolution professionals. Further if once someone has admitted
the application, the code prohibits the withdrawal of the same. By doing this the code
leaves no scope of settlement. The code lacks any confidentiality obligation as it
allows any person to view the information memorandum put together by the
insolvency professional. The code also puts a lot of unchecked power in the hands of
the insolvency professional, leaving scope of them going corrupt and chance of
unjustified use of power by them. Thus, due to all these above shortcomings, the bill
itself satands against its own sole principal and thus further hardens the path for
increasing the ease of doing business in India.
It lacks provisions equivalent to Chapter 11 of the US bankruptcy law, which allow a
voluntary appeal by a debtor to be given a chance for a turnaround that the bankruptcy court
can grant, if the court finds it feasible, regardless of the creditors’ verdict.

IBC interacts with numerous laws. E.g. labour laws and the Industrial Disputes Act, 1947.

The proposed resolution plan requires 75% in value of creditors to sign for it. It creates the
risk of the minority creditors being disenfranchised.

Code provides a hard deadline of 180/270 days to complete the corporate insolvency process,
failing which liquidation starts. Negotiating under the shadow of liquidation may lead parties
not to conduct a broad enough market search for the ailing corporate debtor and will likely
result in fire sales (translating into creditor under-recoveries).

There is a need to increase the number of NCLT benches, IP professionals, and ICT
technology for faster case proceedings.

Issue of Group insolvency needs to be fixed. Group insolvency means insolvency of one
company of a group of companies. E.g., Tata Sons have many companies like Tata Motors,
Tata Capital, TCS etc. More clarity on the issue when one or more than one company of
group undergoes insolvency process.

Working Appraisal of Insolvency and Bankruptcy Code

Achievements

IBC Regime is working better than any other previous regime. Since the inception of the IBC
in December 2016, 5,893 Corporate Insolvency Resolution Processes (CIRPs) have
commenced by end-September 2022, of which 67 per cent have been closed.

The time to settle insolvencies decreased to 1.6 years in 2020 (from 4.3 years). It is an
improvement, but it should also be noted that in 64% of the cases where the Insolvency
Process was started under the Act, the threshold of 270 days was breached (as of Feb 2023)

Corporate behaviour change wrt outstanding unpaid loans: Earlier, the Insolvency process
used to take 4.3 years. Hence, Corporate houses used to be non-serious about paying these
unpaid loans. Now, the time to solve insolvency has decreased to less than a year, and as a
result, they have started repaying loans in fear of losing control over the company.
Amount recovered – Shows mix trend

In the case of big loans like that of Bhushan Steel, banks have recovered 85%.

But in the case of MSME loans, the recovery rate is below 50% (but still higher than the
previous recovery)

Uniform and universal application: RBI has withdrawn other resolution schemes such as
Strategic Debt Restructuring (SDR) Scheme, Scheme for Sustainable Structuring of Stressed
Assets (S4A) etc.

In Ease of Doing Business, the Rank of India wrt resolving insolvency has decreased due to
these changes.

Challenges

Low recovery rates: The recovery rate is meagre, with some of the insolvency processes
giving haircuts of up to 90-95%.

Delays: The timeline for settling the cases under the act is not followed as more than 71% of
the cases remains pending for more than 180 days.

Staffing and infrastructure issues: NCLT is not equipped to handle the load as it operates with
just half of the sanctioned strength.

Need for strengthening homebuyer rights: According to a 2018 amendment to the IBC, a
minimum of 100 homebuyers, or 10% of the total flat purchasers, are needed for initiating the
process. However, homebuyers face practical difficulties in gathering the required number to
initiate insolvency proceedings against the real estate owner.

Cross-Border Insolvency: IBC lacks standardized cross-border insolvency, as observed in

Videocon and Jet Airways cases.

Suggestions and Recommendations:

The Insolvency and Bankruptcy Code (IBC) 2016 which was enacted in May 2016, a
milestone event in the financial sector reform
In the earlier restructuring / rehabilitation schemes, the success was limited as the reins of the
company still continued with promoters. With IBC moving to creditor-in- possession, the
balance of power shifted and change of promoter/ management started having a deterrence
effect on erring promoters with real fear of losing control of the company. Access of IBC,
even to operational creditors, was a great move to inspire confidence in the sanctity of
contractual obligations. Earlier, dedicated recovery tribunal/ empowerment was limited to
financial creditors only. What IBC did was to introduce a set of intermediaries like the
Resolution Professional (RP) to manage affairs of the company, until a resolution plan was
approved. The concept of Resolution Applicants (RA) was brought in for providing
financial/strategic investors and / or turnaround specialists to take over the defaulting
company. A substantially reduced timeline and greater certainty about outcome. While the
timeline in many cases undergoing resolution or completed resolution exceeds the IBC
prescribed time limits, they are still way ahead compared to long and inordinate delays in
other recovery mechanisms. The last, but not certainly the least, is a lot of disclosure and
information dissemination in IBC cases. A periodic IBBI newsletter at quarterly intervals and
regular updates on its website are key enablers for obtaining a fair picture of IBC cases in a
transparent way and inspires confidence. The greatest strength of IBC, in my view, is its
ability to fix the bugs during its operations and install updated versions on an ongoing basis.

IBC has come under fire recently due to efforts by some errant promoter(s) by attempting
backdoor entry and huge haircut taken by creditors in a few cases which have created uproar.
The standing committee on finance recently also submitted a report, ‘Implementation of
Insolvency and Bankruptcy Code – Pitfall and Solutions’. There has been a series of
consultations by MCA & IBBI with various stakeholders and two discussion papers have
been put up by IBBI with proposed changes in various aspects relating to resolution and
liquidation, a few of which (these are representative broader aspects) are listed below:

Code of conduct (CoC) for Committee of Creditors (CoC). It is the CoC which takes all
decisions after an account is admitted under IBC. Even the Supreme Court has held the
commercial wisdom of creditors as final, as far as vetting or rejection of resolution plans is
concerned. However, there is no regulation around code of conduct of this powerful body. A
draft code of conduct has now been put up for discussion, which covers conflict of interest,
transparency in decision-making, authorisation to take on the spot decisions, judicious use of
power to balance all stakeholders’ interest, maintaining confidentiality of documents and
discussions etc. If CoC (committee of creditors) adhere to a strict enforceable CoC (code of
conduct), this will strengthen integrity of the IBC process.

2. Putting an end to number of changes to the resolution plan and wild card entry, which
resulted in prolonging the IBC process, the discussion paper proposes to restrict amendments
to the resolution plan to maximum two and no unsolicited plan to be entertained. With
reiteration of IBC’s core goal of reviving units, the code of conduct also urges CoC to protect
the corporate debtor (CD) as a running business and its assets, and to extend interim finance
to the extent required for completion of the process. Stakeholders Consultative Committee:
An SCC is constituted to oversee the process once the company goes into liquidation. Earlier,
the scope of engagement of liquidator with the SCC was discretionary. Now, it is proposed to
provide that the liquidator shall consult the SCC for all significant matters related to
liquidation process, including appointment of professionals (and their remuneration), and sale
of assets (including major aspects such as fixation of reserve price, manner of sale, etc.
Movement towards the Swiss Challenge method in bidding both in resolution and liquidation.
In alignment with the current RBI guidelines applicable to banks for sale of assets, the
discussion paper suggests the Swiss Challenge method to be used in processing competitive
bids. Once the suggestions are evaluated and necessary changes made in IBC, it will address
a large part of ills now plaguing IBC and debug it. The revised version will be more effective
in IBC implementation. The strength of any system is its ability to respond to developing
situations timely and effectively.

n August 15, 2022, as the nation marked 75 years since independence from British rule, the
Hon’ble Prime Minister Narendra Modi pledged, from the ramparts of the Red Fort, to raise
millions out of poverty and turn India into a developed country1 in the next quarter-century.
To achieve this, the Hon’ble Prime Minister said India would be guided by the ideals of self-
reliance and the spirit of international partnership to attain excellence in science and
technology, set up industries, and attain food and energy security. He said the journey of the
last 75 years had seen ups and downs with India battling against all odds with resilience and
perseverance. He called upon the people to remove any trace of a colonial mindset. ‘It is a big
resolution, and ‘we’ should work towards it with all our might’, he said. To become a
developed nation, reforms are required in various areas which have long been hamstringing
India. Futuristic and visionary policies will have to be formulated at multiple levels. Besides,
India will need to meet the threshold of high-income country in terms of economic
indicators.2 Applying the criteria prescribed3 by the World Bank for high-income countries
and the unchanged population base for India over the next 25 years, the Indian economy
would need to grow at a particular rate to reach the goal. While reforms and policy initiatives
in multiple areas are needed to support the grand target of turning India into a developed
country in the next 25 years, two areas which assume greater importance and demand priority
attention in the early years of Amrit Kaal4 are, judicial reforms to expedite enforcement of
contract; and making the country’s insolvency system, more robust, and globally, palatable.
These two areas, inter-linked in many ways, are the emphasis of this article. EFFICIENT
CONTRACT ENFORCEMENT Efficient contract enforcement is essential to economic
development and sustained growth.5 Economic and social progress cannot be achieved
without a well-functioning judiciary that resolves cases in a reasonable time and is
predictable and accessible to the public.

Economies with a more efficient judiciary, in which courts can effectively enforce
contractual obligations, have more developed credit markets and a higher level of
development overall. Overall, enhancing the efficiency of the judicial system can improve the
business climate, foster innovation, attract foreign direct investment and secure tax
revenues.6 Enforcing a contract through the courts in developed jurisdictions takes
significantly less time than it takes in India. For instance, it can take less than 10 months in
Singapore and New Zealand.7 Many studies and reports have spoken aloud about the
pressing need for reforms in area of enforcement of contract in the country. The Government
of India has been monitoring an array of legislative and policy reforms to strengthen the
enforcing contracts regime in India. These incremental steps, although commendable and in
the right direction, have helped, but it is time to adopt some path breaking reforms, to meet
the laudable goal set by the Hon’ble Prime Minister. ROBUST INSOLVENCY SYSTEM
Every year, billions of rupees in business value, jobs, and capital are lost or side lined as a
result of businesses becoming insolvent and closing their doors. An efficient insolvency
system encourages enterprise, underpins investment and economic growth, and creates
wealth. It helps create a sound climate for investment, and enable market participants to more
accurately price, manage and control default risks and corporate failure. An effective exit law
ensures maximum play in a fair reallocation of assets to more efficient market users. A robust
corporate restructuring can prevent many viable businesses in financial distress from
continuing as going concerns when they are in a state of insolvency. In 2016, India
introduced the Insolvency and Bankruptcy Code, 2016 (IBC/ Code) paving the way for a
much-needed modern framework to deal with the insolvency and bankruptcy of corporate
entities in India. The Code has moved forward in leaps and bounds in a very short span of
time. Due to effective implementation of the Code, green shoots have already emerged.
While the speed with which the Government acted to enact and implement the Code is
applaudable, continued absence of significant provisions, like the cross-border insolvency,
group insolvency and others, and delays in appointment to National Company Law Tribunal
(NCLT) and in approval of resolution plans by NCLT is starting to take some sheen off an
otherwise shining piece of legislation. To support the goals set by the Hon’ble Prime
Minister, India needs a robust insolvency system that ranks amongst the best in the world and
an adjudication authority (as part of the judicial framework) that complements such
insolvency system. No degree of substantive law improvement—even world’s ‘best practice’
substantive law—will bring the Code robust without effective enforcement from one end of
its spectrum to the other. Better performing courts have been shown to lead to more
developed credit markets.8

LEAP OF FAITH DECISIONS This article suggests, some macro and other micro, but bold
and out-of-box decisions, reforms and other measures needed that will contribute to
formulating the collective ‘might’, as referred by the Hon’ble Prime Minister referred in his
address, to achieve the target set by him. Implementing some of these would require a leap of
faith. New approach: Ministry of Economic Affairs In the Amrit Kaal, the names and
businesses of many ministries, both in the Central and State Governments, should represent
the aspirations of the new age India and its global status. A Ministry of Economic Affairs
could be formed to be made the charge-de-affairs for fulfilling the nation’s economic
aspirations, and to serve as the nodal ministry for judicial reforms, reforms in other economic
laws, including further reforms in the insolvency laws, as also in the laws that orbit around
such economic laws. The judicial independence and the strength and efficiency of judiciaries
are directly associated with economic growth. However, when people think of how courts
affect them, they typically think in a public law mindset. They think about the ‘big issues’
decided under the Constitution. That type of judicial action dominates both public perception
and legal scholarship. Thus, when people think about how courts affect them, they think more
about hot-button political issues and the ubiquitously reported criminal cases. This slant
toward thinking predominantly about public law is readily apparent in the multiple stories
presently covering arrests and standard criminal trials and marquee constitutional litigation.
Private law often gets shunted to the back of people’s minds because they think of it as solely
affecting the parties. Far less coverage is given to contract actions involving businesses or
individual citizens in their economic lives. This perception, and mis-understanding of the role
of Judiciary has, for many decades, undermined the importance of judiciary in economic
prosperity of the country. Furthering commerce has to be one of the central goals of the
courts, alongside protecting the rights of the citizens. Similarly, insolvency law is an essential
part of any country’s financial architecture, as emphasised in the earlier paragraphs. There are
many other economic laws that play key role in the economic development. Bringing the
inter-linked areas of the ministries that are responsible for administrative rules of business for
the judiciary and other economic ministries together, under one ministry, will provide the
much required co-ordinate approach, result in greater cooperation, avoid delays on account of
inter-ministerial consultations, centralise the reform process and help accelerate delivery. It
will also send out a powerful message and give a thrust to the narrative to make the goal set
by the Hon’ble Prime Minister, a national mission. From a perception advantage, it will help
break away from the mindset shackles of the past. Thinking big: India as next restructuring
capital Indian insolvency regime is just over five years old. It is still to deepen its roots. Yet,
the development of a sophisticated insolvency system in a short period of time shows that the
Indian Government and its institutions have the capacity to implement complex economic
laws with great maturity, its stakeholders are quick learners, and the Indian professionals are
capable of providing high quality services. To top it all, it has the judges who can produce
high-end jurisprudence in a branch of economic law new to the country. Therefore, there is
no reason, why India should not shift gears and press the accelerator on upgrading the
insolvency ecosystem. India should set the aim to become to most attractive jurisdiction for
restructuring. Creditors and debtors prefer to choose the most efficient jurisdiction for
resolution of insolvency. A developed country is a natural claimant of this space as it has the
supporting infrastructure to effectively apply a sound legislation. India need not wait to
become a developed country to stake claim for this space. It should aspire to become a global
capital for restructuring, sooner. This will require a world-class insolvency ecosystem. A case
in study for this purpose is Singapore. Singapore has put in place a national strategy to
become a global hub for dispute resolution in economic matters, including commercial
arbitration, and to pitch the country as an effective and efficient jurisdiction for restructuring.
They are rapidly creating soft and hard infrastructure to support this mission. Global
institutions are being encouraged to set up regional shops in Singapore. Both, the judiciary
and the executive are working in tandem and cooperation to advance this national goal, as is
evident from the architecture and mission of Asian Business Law Institute.9 A similar
national strategy by us. Use of soft power to build awareness about the Code Soft power is
the most critical diplomatic tool. Countries package their soft power by emphasising the
qualities of governance, culture, diplomacy, education, and business innovation. This
packaging requires innovative use of public and private resources to subserve the larger
national purpose. As implied by its absence from ‘The Soft Power 30 Index’10 (India does
not figure in a list of top 30 countries in terms of soft power), India does not yet benefit as
much from international awareness, positive associations or investments in cultural
diplomacy as many other countries. Most cultural diffusion to overseas audiences through
private sector is limited, from yoga to Indian food, to Bollywood, and other select areas. One
of the pillars of the soft power is business and trade. Soft power has a significant impact on
the decisions made by the people, businesses, entrepreneur, and the governments. The
perception of a country/nation forms a key component in economic development and for
corporate. The Code is considered one of the most significant economic reforms in
Independent India. The Indian judiciary stands alongside the best, globally. We need to make
an effective use of soft power to communicate this through the use of soft power. India
should encourage this through an integrated approach that amalgamates public diplomacy at
the global level with a creative economy at the local level by involving stakeholders and
artists, entrepreneurs, academics, policy makers and civil society. Films, literature and other
creative modes, subtly provide information and create impressions, and help maximise the
reach. This, over time, develops into a narrative. A coherent effort is needed to raise India’s
brand value abroad regards the insolvency system and judiciary, by use of this creative soft
power. There should be a shift from the past and outdated narrative. This will have significant
implications for the conduct of Indian diplomacy and the broader economic role of India,
globally, in the coming years. G20 Presidency as a catalyst for reforms The G20 over the
years has become a premier platform for global economic co-operation. The G-20 initiative is
a coalition of the world’s most-powerful economies plus the EU. It’s role as an influencer,
has expanded over the years. India will hold the G20 Presidency from December 1, 2022 to
November 30, 2023, and host the 18th G20 Summit in 2023. Hundreds of official meetings
will be held around employment, health, digital economy, trade, investment, climate, anti-
corruption, tourism, culture, socio-economic development, education, and women
empowerment will continue to stay on course. There will be academic interactions and
meetings around the international financial architecture, financial inclusion and sustainable
finance, financing for infrastructure, climate finance, and tax matters. These conversations
must continue on the sides of the bigger issues. India’s presidency of the G20 grouping next
year presents an enormous opportunity to accelerate sustainable growth within India, in the
emerging world, and beyond, and become the launch pad for rolling out the agenda of policy
decisions and reforms needed to accomplish the aspiration turn India into a developed
country in the next quartercentury. The G20 members and delegations should be showcased,
through public and private sector interactions, the progress made in the areas of enforcement
of contracts and insolvency, as well as the supporting infrastructure. Path breaking reforms,
including the judicial reforms and upgradation of insolvency system to make it truly global,
should be launched during the G20 Presidency, by implementing the reforms in pipeline.
Cross-border insolvency, group insolvency, introduction of hybrid insolvency system,
mediation, law for financial institutions insolvency resolution, and other reforms should be
planned for introduction and implementation during the G20 Presidency. Agenda for more
futuristic reforms should also be set during this period. Adopt hybrid insolvency system Our
legal system is based the common law system – a system of law based on recorded judicial
precedents- came to India with the British East India Company. Many of these laws continue
even after 75 years of Independence. As the Hon’ble Prime Minister said, we should word
missing the colonial mindset. Free markets operate efficiently in countries that were not
colonies of the British. Like many common law countries, India has a ‘creditor-in-control’
style insolvency model. The Code enables taking control of the company away from the
owners and give it to the creditors through appointing an independent Insolvency
Professional. The thinking being that we shouldn’t leave company control in the hands of the
very parties that got the company into its financial problems. The creditor-in-control model
comes from the scale to which the country relies on credit to fuel the growth of its economy
and subsequently, the country’s social tolerance to accepting business failure to promote risk
taking and entrepreneurship. Chapter 11 bankruptcy in the United States of America, on the
other hand, is a popular debtor-in-possession model. Around the world, insolvency laws are
evolving to incorporate more forgiving debt relief and restructure arrangements. Many
countries are thus, making room for debtor-in-possession system in their insolvency
framework, and adopting a hybrid model. This hybrid process comes with the debtor-
inpossession and creditor-in-control model. In 2017, Singapore introduced new restructuring
laws, adopting parts of the Chapter 11 bankruptcy laws, reducing the barriers of entry for
distressed businesses to seek support. In Australia, piecemeal changes were made to soften
the perceived ‘creditor favouring’ insolvency laws through introducing safe harbour in late
2017 and a stay on ipso facto clauses in mid-2018. In 2021, India introduced a ‘debtor-in-
possession’ style of arrangement through the pre-pack regime for small and medium business
restructure. Through this reform, the government has set the stage to allow directors to retain
control of their businesses while seeking external professional support. India should consider
making a recalibration of the balance between debtor and creditor control, to attract investors
from both, the ‘creditin-control’ and ‘debtor-in-possession’ jurisdictions. This will help make
the Code, globally palatable. Rethink the structure and composition of NCLT The delays in
deciding cases by NCLT has shaken the confidence of some stakeholders, albeit not
irretrievably. There is a definite need for improvement in the functioning of NCLT to make it
more efficient. Although efficiency is only one aspect of the quality of a judiciary, it
nonetheless is measurable, unlike some of the other essential qualities. One important aspect
of efficiency is time to disposition of a case.11One of the common complaints by NCLT and
other stakeholders is lack of resources. More money and especially more judges would
presumably, other things equal, lead to faster disposition of cases and perhaps more effective
judiciaries. Although budgets are a big problem, it is reasonably clear that neither budgets nor
numbers of judges are the heart of the problem. Ecuador and Peru have only one judge per
100,000 people, but Singapore has less than one judge per 100,000 people (compared to 27
per 100,000 in Germany and 10 per 100,000 in France).12 While a score of measures are
needed to address this issue, there is a need to go back to the drawing board and reimagine
the adjudicating authority. The NCLT structure was introduced nearly two decades ago. We
are a different nation now, 20 years later. In a free market dynamic economy, where private
sector is the central engine of growth, it is imperative that NCLT (in its reinvented avatar)
should have an adequate representation from the private sector. An equal percentage of
judicial members should be appointed by inviting senior and experienced members of the
Bar, and from other expertise available in the market. They will bring with them the readily
usable experience. Reputed professionals guard their reputation through their conduct and
behaviour. The establishment should show trust in reputed professionals. In National
Company Law Appellate Tribunal, the experience of technical members is not optimally used
as appeal proceedings are mainly on questions of law. Their experience can be better utilised
in other forums. Other structural changes are required Pre-insolvency resolution and
preventive insolvency process Pre-insolvency proceedings, at their core, inhabit a space on
the spectrum somewhere between a pure contractual workout and a formal insolvency or
rehabilitation proceeding. They are restructuring proceedings that corporate debtors can
access before they become insolvent with the aim of avoiding insolvency. They entail a
surgical debt restructuring and an early intervention at the first signs of distress, concentrating
on financial creditors rather than creditors of the operating business, permitting no, or limited,
court involvement, avoiding stigma and reputational damage. Such proceedings may preserve
value better than later-stage intervention through formal insolvency proceedings that
implicate all stakeholders, and almost invariably result in distressed asset sales of one form
(liquidation, break up) or another (pre-pack designed to achieve a going concern, or at least a
‘better than liquidation’ outcome). Ever since the fall of Lehman Brothers and the financial
crisis that followed, the world has witnessed a proliferation of various ‘light touch’ financial
restructuring techniques in the form of pre-insolvency proceedings. These proceedings
inhabit a space on the spectrum of insolvency and restructuring law, somewhere between a
pure contractual workout, the domain of contract law, and a formal insolvency or
rehabilitation proceeding in the domain of insolvency law. Policymakers, especially in the
European Union, have responded to market developments by embarking on an aggressive
new phase of corporate rescue oriented legislative endeavour that focuses on so-called pre-
insolvency or preventive insolvency proceedings. This current vogue for pre-insolvency
proceedings is the latest phase of a global effort to fashion a comprehensive range of debt
resolution tools for use at various stages of the corporate life cycle. While pre-pack process
has been introduced for small and medium enterprises, it has not been used by its consumers
due to complex legal and regulatory provisions. It is time to develop a simple, effective and
efficient pre-insolvency resolution toolkit, which also includes tools to prevent insolvency,
which should be available to all classes of debtors. This will benefit the Indian corporate and
financial sectors, immensely. Develop the legal and regulatory framework for out-of-court
dispute resolution (arbitration and mediation) and debt recovery Time taken in insolvency
resolutions concluding has been a matter of contention and debate. The commencement of an
insolvency case reveals the debtor’s problematic financial situation and hinders business.
Mediation provides strong incentives for both parties to engage in fast and efficient dispute
resolution and look for a common business solution. Insolvency is not an adversarial process.
Yet, disputes arise between parties, which has clogged the NCLT with avoidable cases. It
also adds to the cost of resolution and provides uncertainty. As of now mediation has not
been utilised for resolving of insolvency disputes. Mediation can be a viable option in a
country like India, where the population is enormous, and wealth is not equally distributed. It
is time for the framework of the Code to make room for mediation. Mediation is rapidly
becoming as an acceptable mode of dispute resolution in insolvency in many countries with
advanced insolvency systems as it allows the parties to reach an agreement through
persuasion and ‘party-driven solutions’. India should start preparing the legal framework for
mediation which can deliver top end mediation through qualified and trained cadre of
professionals to complement the efficiency of the Code. This is likely to reduce the over-
bearing workload of the benches of NCLT. Develop a community in pursuit of scholarship
Another key initiative needed by the country is to strengthen the interaction between the
Government and academics in public policy making in due course. Academic knowledge,
evidence and expertise can help inform, design, improve and test policy-and ultimately make
government policy better. Research based analysis bridges the gap between policy and
practice, and can leads to strong, inclusive and thorough implementation of the insolvency
regime. The policy makers can build on experience of scholars. In developed countries,
academics continue to play a very important role in supporting policy development, industry
research and finding innovative solutions. As a country, we should aim to develop a
community in pursuit of education, research and scholarship in the field of economic laws, in
particular insolvency laws. Development of stressed assets market India’s stressed assets
market is estimated at $115 billion. The enactment of the Code has created an efficient
market for resolution of distressed assets. A massive amount of capital is needed among the
intermediaries in the resolution process of stressed assets. A secondary market for distressed
assets can reduce the debt collection burden on banks and free up resources and capital to
support new lending. It can also enhance bank’s risk management strategy by providing
another instrument to manage credit and market risks. In a developed economy, market
participants are less reliant on loans from banks to finance their projects. The stressed assets
funds and investors are looking for opportunities to invest in India. There is a genuine interest
amongst global investors in the distressed assets investment markets with their inherent ‘buy
low-sell high’ potential. But they are hesitant to take the leap of faith in the absence of an
ecosystem that enables quick acquisition, provides an early closure of transactions, leaves no
uncertainty from litigations challenging the resolution plans approved by the NCLT and
allows repatriation of funds. We need to make the insolvency system more robust to attract
these players. CONCLUSION To achieve the high target set by the Hon’ble Prime Minister,
India needs to show persistent and unprecedented resolve and efforts. India should catch the
bull by its horns and launch the next generation reforms which will propel the country to
amongst the top thinkers on the global insolvency table and establish its leadership in the
subject. This will require taking a leap of faith. It would be a boon, not just to every Indian,
but to the world at large, if India becomes a developed nation13 by 2047, lifting millions of
Indians out of poverty.
Bad loans of Indian banks are every year are getting cleaned up through technical write offs
with an awareness that there will be no recovery in most cases. This strategy is adopted as a
tax saving measure with full support from finance ministry.

Insolvency and Bankruptcy Code, 2016 is comprehensive economic legislation. It is one of

the most significant reforms in the regime of insolvency laws. Corporate Insolvency
Resolution is a rehabilitation process for the corporate debtor to eliminate unpaid and
distressed financial Debt. The primary aim of the Code is the restoration of the debtors from
financial distress. Its goal is to support and restructure viable businesses and facilitates the
exit procedure to unworkable firms. CIRP is a time-bound recovery mechanism for creditors
that allows the free flow of credit in the market. The Code has attracted a large amount of
recovery litigation in a very short time. The practical challenges prevent the Code from
achieving its objectives, especially the goal of providing efficient, impartial, and timely
Resolution to viable corporate persons. The Supreme Court and other adjudicating authorities
have shown judicial restraint when it comes to deciding the validity of the provisions under
the Code, including amendments, policy decisions, regulations, etc. Higher Courts in India
have constraints themselves in examining economic policy matters related to the
interpretation of the provisions of the Code and left them to the wisdom of the legislature.
The Code is a significant contribution to the insolvency laws as matters relating to Insolvency
are consolidated into a single legal framework. However, since the commencement of the
Code, the corporate insolvency process has attracted various practical challenges in its
performance and implementation. The challenges such as common default amount for
initiating insolvency process for all types of creditors or corporate persons or some of the
provisions appear to be favoring financial creditors more than operational creditors in the
Code. There is a lack of clarity with the role of management, including the BOD of the
corporate debtor, during insolvency proceedings. There is a requirement to demarcate the role
of the debtor in insolvency proceedings as they have the best interest to protect the company.
In addition to these challenges, the scope of judicial intervention by the adjudicatory
authorities has become a debatable matter during the application of insolvency laws.
Adjudicating authorities in numerous legal precedents explicitly allows the paramount
importance to the commercial wisdom of the creditors' Committee in the insolvency process,
especially while approving resolution plans. These practical challenges have attracted an
enormous amount of litigation exposure. Although the judiciary is providing momentary
solutions to such difficulties while interpreting the provisions of the Code, despite that, there
is a need that law-making authorities look at those limitations by themselves, as they are at a
better place to bring long-term determination. The following are the suggestion that may be
taken into consideration by the policymakers or legislative authorities for bringing suitable
amendments to the existing law.  The existence of only one defaulting amount to initiate
insolvency proceedings against all types of the corporate debtor is a matter that requires re-
consideration. The legislature may introduce different threshold amounts for different kinds
of creditors or corporate persons to initiate a recovery mechanism and to trigger the
application of the Code. Considering all types of creditors are not identically situated in the
Code, hence, they required differential treatment while triggering insolvency proceedings
under the Code. In addition, the legislature may introduce a system of pre-packaged
insolvency process for all types of creditors, as it will allow ‘outside the court settlement’
along with the involvement of debtor in forming resolution plans. This solution will be more
viable in the current scenario as the legislature has increased the minimum defaulting amount
for initiating insolvency litigation proceedings.  The representation of the operational
Creditor is absent in the Code. Differential treatment to operational creditors while triggering
the application of insolvency process against the corporate debtor is explicitly given as per
the provisions of the Code. Considering the recent changes made to the minimum defaulting
amount for triggering the Code's application, it is essential to make requisite amendments in
the law. Revision of law in favor of operational creditors will help reduce the challenges that
can arise due to differential treatment and the increased defaulting amount. A pre-packaged
insolvency process may be allowed for all type of operational creditors for the time being.
Lawmakers may include participatory rights, including voting rights in favor of operational
creditors, to give them more say in formulating and approving the Resolution. Instead of
providing equitable treatment to operational creditors during the distribution of claims in
resolution plan, their involvement in the Committee of creditors may bring diverse
perspectives in insolvency proceedings that may result in making decisions that are more
favorable to corporate debtor.  The limited scope of judicial review allows adjudicating
authorities to uphold the commercial wisdom of the Committee of creditors in the decision-
making process for rehabilitating corporate debtors. Judicial Authorities support the
commercial decisions made by the Committee of creditors and prevent themselves from
going into the merits of the case, especially the approval of the resolution plan.
Adjudicating authority cannot look into the justness of approved Resolution until it is
discriminatory and unfair to involved/connected stakeholders of the corporate debtor.
However, there is no clarity on the situation where the Committee of creditors does not
exercise commercial wisdom while approving the resolution plan. Alternatively, it has
exercised its wisdom in a mala fide manner or by considering irrelevant, extraneous factors.
This can be resolved if either legislature enacts suitable amendments or Higher Courts by
establishing judicial precedent may make this situation transparent.  Suspension of the Board
of Directors on the appointment of Interim Resolution Professional led to the absolute
exclusion of the managing authority of corporate debtor from an insolvency process. The
'Creditor in Control' model excludes the role of management in formulating and approving
the healthy resolution plan for the corporate debtor. As Resolution Professional may not
know the peculiarities involved in the business of the corporate debtor, may not perform its
duties in favor of corporate debtor as management may perform because of their experience
and knowledge about the company. Moreover, the mere participatory role to corporate
debtor's stakeholders while approving the Resolution may also go against the objective of the
Code. Therefore, it is suggested that management of the corporate debtor should not be
excluded entirely from the insolvency process, as they are more concerned about saving the
corporate debtor. Policymakers may make participatory rights of the corporate debtor's
management more active to preserve the interest of the corporate debtor in the true sense.
However, this suggestion does not include those corporate debtors in its ambit who are acting
in a mala fide manner or intentionally defrauding creditors.