IBC delays: The Insolvency and Bankruptcy Code was meant to end India’s protracted debt resolution cycle. Its defining feature—a strict timeline—has not held. The gap between statute and practice is now under scrutiny at the Supreme Court.
In a matter involving AVI Developers, a Bench of Justices J B Pardiwala and K V Viswanathan flagged that a resolution plan approved by the Committee of Creditors (CoC) has remained pending before the National Company Law Tribunal for an extended period. The court termed the delay “unfortunate” and noted that such inaction defeats a time-bound insolvency framework. It has directed the tribunal and the Insolvency and Bankruptcy Board of India (IBBI) to submit nationwide data on pending approvals.
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IBC timelines turning aspirational
The Code mandates completion of the corporate insolvency resolution process (CIRP) within 330 days, including litigation. In practice, this has become aspirational. Recent IBBI data shows that the average time for resolution has exceeded this limit, with many cases taking well over 600 days.
The AVI Developers case illustrates how delay compounds. A claim of Rs 85 crore by IIFL Finance was first rejected by the resolution professional, later admitted by the tribunal, and then complicated by an arbitral award alleging fraud. The CoC approved a resolution plan in July 2024, but the NCLT has yet to deliver a final order. Multiple layers of claims, counterclaims, and parallel proceedings prolong the process.
A significant part of delay also arises before admission. Insolvency petitions under Sections 7 and 9 often take months to be admitted by the NCLT, stretching the effective timeline well beyond the statutory framework.
Outcomes: Resolution versus liquidation
Delay is only one part of the problem. Outcomes have also diverged from initial expectations. A substantial proportion of admitted cases ends in liquidation rather than resolution. According to IBBI trends, liquidation remains the most common closure route, particularly for smaller or operationally unviable firms.
Recoveries have also been uneven. While headline cases have delivered strong outcomes, aggregate recovery rates for financial creditors have typically been a fraction of admitted claims. This weakens the Code’s objective of value maximisation and reinforces incentives for quicker, lower-value exits.
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CoC processes and creditor incentives
Delays are not confined to tribunals. An IBBI discussion paper notes that CoC decision-making itself contributes to slippage. Inadequate documentation of deliberations leaves ambiguity on the rationale for commercial decisions, inviting subsequent challenge.
Proposed reforms aim to standardise this front end. Creditors may be required to record recovery expectations relative to liquidation value, the adequacy of market discovery, and the credibility of resolution applicants.
The CoC is also shaped by incentives. Banks operate under regulatory scrutiny and provisioning pressures. Faced with uncertainty, they may prefer faster resolution even at steep haircuts over prolonged litigation. This affects bidding dynamics and can limit the depth of the resolution market.
Tribunal capacity and litigation overhang
Procedural fixes will not resolve capacity constraints. The expansion of the IBC framework has not been matched by tribunal staffing or infrastructure. Committees and parliamentary panels have flagged this mismatch repeatedly.
The Code rests on the primacy of the CoC’s commercial judgment, with tribunals expected to play a supervisory role. In practice, tribunals often examine the substance of resolution plans, especially where fraud or irregularity is alleged.
Delays are further extended through appellate litigation. Appeals before the National Company Law Appellate Tribunal and the Supreme Court have become a routine feature, stretching timelines beyond the control of the primary adjudicating authority.
Sectoral complexity: Real estate cases
A large share of ongoing cases originates in the real estate sector. These involve multiple stakeholders, including homebuyers recognised as financial creditors. Resolution in such cases is structurally complex, often requiring project completion rather than asset sale. This adds to delays and complicates the application of standard IBC processes.
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IBC delays: Reform intent and economic costs
Policymakers have acknowledged the problem. The Insolvency and Bankruptcy Code Amendment Act 2026 seeks tighter timelines, fewer procedural gaps, and stronger enforcement. Measures target delays at admission and aim to strengthen creditor protection.
Delay carries economic cost. The IBC was designed to recycle capital by resolving stressed assets quickly. When resolution stalls, asset values erode and investor interest weakens. For banks and financial institutions, this feeds balance sheet stress.
An insolvency regime depends on predictability. If timelines remain uncertain, confidence in the IBC weakens. Creditors may revert to alternative recovery channels. Investors will price in higher risk.
The Supreme Court’s intervention brings attention back to implementation. The push for better CoC documentation and transparency is necessary. Without capacity expansion, tighter admission discipline, and limits on litigation spillover, the Code’s original promise remains incomplete.