Unveiling Key Challenges In The IBC: A Critical Study Of Loopholes And Structural Issues In India’s Insolvency Framework

Abstract

The Insolvency and Bankruptcy Code (IBC) has been a landmark reform in India’s insolvency framework, aiming to streamline corporate distress resolution and promote a creditor-friendly approach. However, despite its achievements, the IBC is not without significant challenges. This paper critically examines the grave issues and loopholes in the Code, focusing on two major concerns: delays in the resolution process and suboptimal recovery rates for creditors. It explores the root causes of these issues, including overburdened tribunals, procedural inefficiencies, and misinterpretation of legal provisions. Furthermore, the paper highlights related challenges such as the misuse of provisions, valuation disputes, and the lack of a comprehensive cross-border insolvency framework. By analysing these structural and procedural gaps, the study provides recommendations to strengthen the IBC and enhance its effectiveness in resolving financial distress while ensuring equitable stakeholder outcomes.