Corporate Insolvency Resolution Process under the IBC: Legal Challenges and the Need for Reform : Author: Roshan Safeeqa A
The Insolvency and Bankruptcy Code (IBC) was passed in the year 2016, aimed at consolidating the scattered approach towards handling insolvency cases in India into one single approach which is time-bound. The Corporate Insolvency Resolution Process (CIRP) is a vital part of this process. Not only does its core purpose go beyond the recovery of debts but also involves the resolution and revitalization of financially distressed corporate debtors with a proper balance among creditors and other stakeholders.
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Introduction:
The Insolvency and Bankruptcy Code (IBC) was passed in the year 2016, aimed at consolidating the scattered approach towards handling insolvency cases in India into one single approach which is time-bound. The Corporate Insolvency Resolution Process (CIRP) is a vital part of this process. Not only does its core purpose go beyond the recovery of debts but also involves the resolution and revitalization of financially distressed corporate debtors with a proper balance among creditors and other stakeholders.
The judiciary has always described the IBC as an essentially law on resolution. However, there have been many problems in the functioning of CIRP such as delays, litigations, issues with valuation, uncertainties about the resolution plan and obstacles in the implementation of its results. Recent regulatory changes show that the process is developing but still more reformations are needed.
Legal Framework of CIRP:
CIRP is primarily governed by Sections 6 to 32A of the IBC. In Section 7, a financial creditor is able to start the process of CIRP on default, whereas Section 9 allows the operational creditor to start the process depending on the requirements of that particular statute. After admission, Section 14 starts a moratorium, Section 17 appoints the interim resolution professional for managing the corporate debtor, and Section 21 sets up the CoC.
The Resolution Professional then conducts the process, invites resolution plans under Section 25(2)(h), and places compliant plans before the CoC. Under Section 30(4), the CoC considers the feasibility and viability of a resolution plan, while Section 31 provides for approval of a plan by the Adjudicating Authority.[1]
Judicial Development and Commercial Wisdom:
In Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2019), it was held by the Supreme Court that CoC consisting mostly of financial creditors is better equipped than other parties for assessing the commercial viability and feasibility, taking into consideration the provisions of IBC.[2]
A more recent development is Kalyani Transco v. Bhushan Power and Steel Ltd. (2025), where the Court emphasized on the importance of finality of the resolution plan and warned that reconsideration of any claim post its implementation will defeat the very purpose of IBC.[3]
Major Legal Challenges:
Delay in Completion of CIRP
Although Section 12 establishes a statutory time framework for CIRP, proceedings frequently extend beyond the intended period because of litigation before the NCLT, NCLAT and constitutional courts, disputes regarding claims and challenges to resolution plans. Delay reduces the value of the corporate debtor’s assets and increases insolvency costs. Consequently, a process intended to preserve the value of a business may sometimes result in deterioration of that value before resolution is completed.
Excessive Litigation
CIRP often involves multiple stakeholders with competing interests. Disputes may arise regarding admission of claims, eligibility of resolution applicants, valuation, avoidance transactions, governmental dues and implementation of resolution plans.
Valuation and Distribution Disputes
Valuation is central to CIRP because creditors and resolution applicants must assess the economic value of the distressed enterprise. Differences between liquidation value and the amount offered under a resolution plan may lead to disputes among stakeholders. The principle of commercial wisdom provides the CoC with substantial discretion, but this makes transparent valuation methodologies and adequate disclosure increasingly important.
Delay in Implementation of Resolution Plans
Approval of a resolution plan does not necessarily mark the end of the practical difficulties. Implementation may involve regulatory approvals, financing arrangements, transfer of assets and settlement of outstanding disputes.
Recent Regulatory Developments:
The IBC framework continues to evolve. In the year 2025, the Insolvency and Bankruptcy Board of India (IBBI) made several amendments in CIRP Regulations. In particular, the Seventh Amendment Regulations of 2025 require that each and every resolution plan must include a statement of beneficial ownership of the resolution applicant along with the affidavit for being eligible for such a benefit under section 32A.
IBBI has also introduced revised forms and strengthened regulatory mechanisms for monitoring insolvency processes. In 2026, IBBI issued further circulars concerning CIRP forms and valuation standards. (Insolvency and Bankruptcy Board of India)
These developments demonstrate that insolvency regulation is moving towards greater disclosure, accountability and standardisation.[4]
Suggestions and Recommendations:
First, the time-bound nature of CIRP should be strengthened by reducing avoidable adjournments and establishing stricter case-management mechanisms before the NCLT and NCLAT.
Second, specialised insolvency benches with adequate judicial and technical capacity should be strengthened so that complex commercial and valuation disputes can be resolved without prolonged litigation.
Third, the Code should promote greater transparency in valuation and resolution-plan evaluation. While commercial wisdom must remain with the CoC, creditors should receive sufficient information to understand the basis on which competing plans are assessed.
Fourth, there should be stronger mechanisms for early identification of viable businesses. Where a corporate debtor remains commercially viable, the process should encourage restructuring before asset values substantially deteriorate.
Finally, implementation of approved resolution plans should be monitored through clearly defined timelines and coordination among insolvency professionals, regulators and governmental authorities. A resolution plan should provide not merely an approved document but a realistic pathway for the corporate debtor’s revival.
Conclusion:
CIRP is a key reform in India's insolvency framework. It replaces a fractured system, geared toward recovery, with a single mechanism focused on resolution and rehabilitation. Rulings of the judiciary have clarified the notions of 'commercial wisdom' of the CoC and 'finality of resolutions plans'. Recently, changes made by the IBBI have provided for more disclosure and regulation.
Nonetheless, the success of CIRP depends on speed, predictability, and effective execution. Slowness, litigation, and valuation disputes may undermine the very value that the insolvency procedure is meant to protect. Thus, the next step of IBC reform should not be just rulemaking but rule optimization.
It is clear what needs to be done: a distressed company should initiate a CIRP, undergo a truly competitive resolution process, and get out of it within a foreseeable period of time without being put into economic insolvency due to procedural delays.
[1] Insolvency and Bankruptcy Code, 2016.
[2] Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2019) 16 SCR 275.
[3] Kalyani Transco v. Bhushan Power and Steel Ltd., Civil Appeal No. 1808 of 2020, 2025.
[4] . IBBI, Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.