Ishaan Phukan is an advocate based out of New Delhi.
As the Insolvency and Bankruptcy Code, 2016[1] (“IBC, 2016 or Code”), completes a decade, the controversy surrounding the recent 99.97% creditor haircut in the approved repayment plan of Zee founder, Subhash Chandra, has raised renewed questions regarding the economic effectiveness and commercial efficiency of the Code.
While the NCLT approved repayment plan of Rs. 6.5 crores against admitted claims of Rs. 22,006.57 crores, might seem like a disappointing return, this disproportionate recovery is not without precedent in the framework of insolvency jurisprudence. There have been past instances where creditors were forced to accept steeper haircuts. In Accura Productions, for example, creditors were forced to absorb a 99.986% haircut, with a minimal recovery of Rs. 8 lakhs against admitted claims of Rs. 581.81 crores[2]. In Thwink Big Content again, creditors sustained an identical haircut of 99.986%, with a final realization of merely Rs. 9 lakhs against admitted claims of Rs. 648.67 crores[3].
Although a prima facie perusal of such exorbitant creditor haircuts may lead one to cast doubts upon the commercial efficacy of the Insolvency and Bankruptcy Code, 2016, a definitive evaluation of the overarching insolvency framework cannot be ascertained by isolated instances alone. The efficacy of the Code must be evaluated by a substantive comparison of the empirical metrics juxtaposed with the time-tested evidence emerging from its practical operation.
Tracing the History of the Code
Introduced pursuant to the recommendation of the Bankruptcy Law Reforms Committee (BLRC) chaired by Mr. T.K. Vishwanathan, the IBC, 2016 was established as a comprehensive, overarching framework for insolvency resolution meant to consolidate and replace the fragmented statutory regime that had previously governed the Insolvency resolution process in India. The legislation was enacted with the cardinal objectives of value maximization of distressed assets and enabling a time bound insolvency resolution, thereby seeking to address the persisting issues of systemic delays and the consequent economic value erosion, which had characterized the erstwhile insolvency regime.
The Code effectuated a paradigm shift in insolvency jurisprudence by supplanting the erstwhile “Debtor-in-Possession” regime with a robust “Creditor-in-Control” model. Consequently, the Committee of Creditors (“COC”) was vested with the commercial and administrative control of the Corporate Debtor during the insolvency resolution process.
Furthermore, the Code adopts a market-driven resolution process guided by a transparent and competitive bidding process to ensure effective debt recovery and optimal value realization of the corporate debtor’s assets at market determined prices. It also seeks to balance value maximization with procedural efficiency by prioritizing the corporate debtor’s rehabilitation as a going concern basis, wherever commercially viable, over its premature liquidation.
What does a Haircut mean?
Interestingly, the Code does not define the term ‘haircut’. However, in banking parlance, the term ‘haircut’ refers to the portion of the debt that the creditors agree to waive or write off. In context of the insolvency process, ‘haircut’ refers to the differential deficit between the quantum of admitted claims and the actual amount ultimately realized pursuant to the successful resolution. Consequently, it refers to the aggregate value of debts that are legally forfeited by the creditors in facilitating the resolution process.
Assessing the Facts and Figures
Based on Insolvency and Bankruptcy Board (“IBBI”) data, the Code has demonstrated significant efficacy in revival of distressed corporate entities and streamlining the pre-admission dispute resolution. Till March 2026, for example, 8,987 Corporate Insolvency Resolution Process (“CIRP”) cases were admitted; with 7,102 cases reaching closure. Approximately 58% of the closed cases, 4,099 companies, were successfully rescued, while 3,003 cases culminated in liquidation. Among the rescued entities, 1388 were closed on account of appeal, review or settlement and 1292 were withdrawn. Over 42% of the concluded cases were pending with the erstwhile Board for Industrial and Financial Reconstruction under the Sick Industrial Companies Act or were defunct, thereby underscoring the Code’s capability in facilitating the revival of financially distressed enterprises. Evidencing the deterrent effect of the Code, over 30,000 cases with underlying defaults exceeding Rs.14 lakh crores were reportedly settled prior to the formal initiation of the CIRP by December, 2025.
A report by the Reserve Bank of India titled “Report on Trend and Progress of Banking in India 2024 – 25” highlighted the following figures:
- The Code was identified as the most effective mechanism for the recovery of stressed assets at 36.6% in terms of comparative assessment with contemporary acts such as the SARFAESI Act (31.5%), Debt Recovery Tribunals (9.5%) and Lok Adalats (2.4%) for 2024 – 25.
- From the total amount of the Rs. 1.04 lakh crores made in recoveries by Scheduled Commercial Banks, almost Rs. 0.54 lakh crores (52.4%) were realized through the IBC framework.
- Additionally, the resolutions through IBC have successfully reduced the gross Non-Performing Assets (NPA) ratio of banks to a historic low of 2.05% in 2025 as compared to nearly 11.8% in 2017. Consequently, these recoveries have enabled public sector banks to achieve unprecedented net profits, reaching Rs. 1.41 lakh crore in FY 2023-24 and improving further to Rs. 1.78 lakh crore in FY 2024-25. This bolstered financial health has enabled these institutions to contribute to the nation’s economic growth.
Similarly, a 2026 study published by IIM Ahmedabad titled “Effectiveness of the Resolution Process: Firm Outcomes in the Post IBC Period” observed a steady improvement across various performance indicators of the resolved entities in the subsequent post-resolution period of five years:
- The aggregate market valuation of resolved listed entities grew from Rs. 2.8 lakh crores to nearly Rs. 9 lakh crores, reflecting strong investor confidence. Further, the 71.91% rise in average employee expenses signal a recovery of jobs in these resolved listed entities.
- The Operating Margin improved from – 26% to 8%, indicating gradual stabilization in margins.
- Average Capital Expenditure (“CapEx”) rose by 106% to signify strong buildup of tangible assets and confidence in future growth.
- In recognition of the strengthened efficacy of the insolvency ecosystem, S&P Global Ratings also upgraded India’s insolvency framework from ‘Group C’ to ‘Group B’. This serves as a significant milestone, re-enforcing the confidence of the stakeholders in the resolution process.
Recovery, Resolutions and Roadblocks
Despite these successes, the Code continues to grapple with systemic bottlenecks after a decade since its initiation. A May 2026 press release issued by the Investment Information and Credit Rating Agency (ICRA) drew attention to two serious issues: the steep rise in the average haircuts faced by the creditors and the growing delays in the resolution timelines. These trends are corroborated by an April 2026 report by the ICRA, which while admitting that the Code has seen resolution of Rs. 4.1 lakh crores to the lenders till December, 2025, highlighted the same two issues: the average haircut the creditors are forced to absorb has ballooned to 68%, and the average recovery timeline has stretched to almost 750 days. This seriously exceeds the statutory mandate of 330 days including extensions and litigation as per the Code.
Another challenge pertains to the capacity constraints of the adjudicating structure, especially the NCLT. The rising volume of insolvency cases has placed considerable pressure on the available benches, leading to backlogs. Additionally, the constant interim applications and complex litigations further delay this process.
The Road Ahead
While questions as to excessive haircuts, value erosion and systemic delays continue to subsist, the Code has unequivocally catalyzed a watershed transformation at bringing the Indian insolvency regime at par with global standards. It has successfully unified the fragmented debtor driven statutory regime into a consolidated overarching insolvency framework capable of balancing stakeholder equities. With the foundational legal architecture in place, the imperative now shifts towards its statutory evolution with a commitment towards optimizing procedural efficiencies, building commercial predictability and ensuring a more equitable balance of stakeholder interests.
The hallmark of a good legislation lies not in rigid infallibility, but in its responsiveness to critiques and its ability to adapt itself to the shifting economic realities. As evidenced by the successive amendments, most notably the 7th amendment[4] in 2026, the Code has proven the requisite legislative agility to be able to address the needs of its stakeholders. Though the road towards a matured Insolvency framework remains fraught with challenges and complexities, the demonstrated and progressive evolution of the Code engenders a robust confidence in the long-term efficacy of the Indian insolvency regime.
[1] Insolvency and Bankruptcy Code 2016, Act No 31 of 2016 (India)
[2] Reliance Commercial Finance Limited v Accura Productions Private Limited, IA (IBC) (Plan) No. 57 of 2025 in CP (IB) No. 101 of 2024 (NCLT Mumbai)
[3] Reliance Commercial Finance Private Limited v Thwink Big Content Private Limited, IA No. 77 in CP (IB) No. 113 of 2024 (NCLT Mumbai)
[4] Insolvency and Bankruptcy Code (Amendment) Act 2026, Act No 6 of 2026 (India)
Leave a Reply