India’s Insolvency and Bankruptcy Code: A Primer for Foreign Creditors

Foreign creditors and researchers studying Indian insolvency law should know that India’s Insolvency and Bankruptcy Code, 2016 (IBC) replaced a slow, fragmented set of recovery laws with a single, time-bound code, widely regarded as one of India’s most significant pro-creditor economic reforms of the last decade.

Before the IBC

Before 2016, a defaulting company could be pursued simultaneously under the Sick Industrial Companies Act, the Companies Act’s winding-up provisions, the Recovery of Debts Due to Banks and Financial Institutions Act, and the SARFAESI Act, often taking a decade or more to resolve, a delay international lenders frequently cited when assessing India’s “ease of doing business” credit risk.

How the IBC process works

A financial or operational creditor (or the company itself) can trigger the Corporate Insolvency Resolution Process (CIRP) before the National Company Law Tribunal (NCLT). A resolution professional takes over management, a committee of creditors (dominated by financial creditors by voting share) evaluates resolution plans, and the whole process is meant to conclude within 330 days including litigation. If no viable resolution plan is approved, the company moves to liquidation.

Where foreign creditors need to pay attention

Operational creditors (including, often, foreign suppliers owed money for goods or services rather than loans) have a smaller say in the creditors’ committee than financial creditors, a structural feature that has drawn criticism and periodic litigation. Cross-border insolvency, involving a debtor’s assets or creditors in multiple countries, is not yet comprehensively codified in India; the IBC’s cross-border insolvency chapter (based on the UNCITRAL Model Law) has been enacted in principle but not yet brought into force, so foreign creditors in multinational insolvencies currently rely on ad hoc judicial cooperation rather than a settled statutory framework, a gap worth flagging for comparative insolvency researchers.

Enforcement record

The IBC’s 330-day target is frequently missed in practice, especially in large, contested cases, and recovery rates, while significantly better than the pre-2016 regime, still vary widely by sector, a point researchers comparing IBC outcomes to Chapter 11 (US) or the UK’s administration regime often examine with actual NCLT data rather than the statutory timeline alone.

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