What is the role of Insolvency and Bankruptcy Board of India (IBBI)?

The Insolvency and Bankruptcy Board of India (IBBI) celebrated its ninth annual day on October 1.

Insolvency and Bankruptcy Code, 2016

• Insolvency is when a company or person can’t pay debts when they are due. 

• The Insolvency and Bankruptcy Code, 2016 replaced India’s fragmented insolvency laws with a unified, time-bound, creditor-driven framework. 

• It aims at faster resolution, value maximisation, improved credit access and boosting India’s ease of doing business. 

• The IBC marked a transformative shift in India’s approach to resolving financial distress.

• At its core, the IBC sought to consolidate diverse insolvency laws into a single, coherent statute, simplifying procedures and accelerating resolution. 

• It introduced strict timelines — 180 days for resolution of accounts under corporate insolvency resolution process (CIRP) and 90 days for fast-track MSME cases — to prevent value erosion and ensure swift outcomes.

• The Code emphasized maintaining the corporate debtor as a going concern and asset value maximisation, not just debt recovery, enabling viable businesses to restructure and revive. By offering a transparent exit mechanism for failed enterprises, it reduced lending risks and promoted entrepreneurship, thereby improving credit availability.

• As of March 31, 2025, a total of 1,194 companies have been successfully resolved under the IBC framework. Through these cases, creditors have realised an amount of Rs 3.89 lakh crore, which is 32.8 per cent of the total admitted claims, over 170 per cent of the liquidation value and more than 93 per cent of the fair value of these companies, as assessed at the time of admission into the IBC process. 

Four pillars of IBC

• The IBC revolutionised India’s approach to resolving financial distress by building a resilient institutional architecture. 

• IBC has four foundational pillars, each reinforcing the integrity and efficiency of the insolvency framework.

1) Insolvency and Bankruptcy Board of India (IBBI): Established as the primary regulator, the IBBI oversees the entire insolvency ecosystem. Its functions include regulating all matters related to insolvency and bankruptcy, setting eligibility requirements for insolvency intermediaries (professionals, agencies, and information utilities), regulating their entry, registration, and exit, and making model by-laws. The IBBI plays a critical role in ensuring the integrity and smooth functioning of the Code.

2) Adjudicating Authorities: The Code established unified adjudicatory authorities to handle insolvency proceedings. For corporate persons, the National Company Law Tribunal (NCLT) serves as the Adjudicating Authority (AA), while the Debt Recovery Tribunal (DRT) handles cases involving individuals and partnership firms. Appeals from the NCLT are heard by the National Company Law Appellate Tribunal (NCLAT), with further appeals to the Supreme Court of India.

3) Insolvency Professionals (IPs): IPs form a specialised cadre of licensed professionals central to the insolvency process. 

They are responsible for:

a) Administering the insolvency resolution process.

b) Taking over the management of distressed companies.

c) Managing debtor assets.

d) Assisting in the collection and collation of relevant information.

e) Providing crucial data for creditors to make informed decisions.

• Their independent and neutral role is vital for maintaining the integrity of the insolvency ecosystem.

4) Information Utilities (IUs): The Code introduced IUs as centralised electronic databases designed to collect, collate, authenticate, and disseminate financial information of debtors. Creditors are required to report financial information, including records of debt, liabilities, and defaults, to these utilities. The purpose of IUs is to remove information asymmetry and reduce reliance on debtor management for critical information, thereby expediting insolvency resolution.

• The IBC has played a pivotal role in improving the ease of doing business in India by introducing a faster and more structured insolvency resolution process, maximising the value of assets, promoting entrepreneurship, availability of credit and balancing the interests of all the stakeholders.

• The Code has constantly evolved over the years and undergone a process of refinement. This continuous evolution reflects a pragmatic approach to legal reform, acknowledging that initial legislation cannot foresee all complexities and must adapt to implementation challenges, judicial interpretations, and evolving market needs. 

• Since inception, the IBC has evolved through six major legislative amendments and over 122 regulatory changes by the Insolvency and Bankruptcy Board of India (IBBI). 

• These reforms have enhanced transparency, efficiency, and stakeholder protection, contributing to improved recovery rates and India’s rise in global ease of doing business rankings.

Insolvency and Bankruptcy Board of India (IBBI)

The Insolvency and Bankruptcy Board of India (IBBI) was established on October 1, 2016 under the Insolvency and Bankruptcy Code, 2016.

It regulates service providers as well as processes under the Code. 

Section 196 of the Code enumerates the functions of the Board. 

The IBBI has the following broad powers and responsibilities:

• Regulation and development of market processes and practices relating to the Corporate Insolvency Resolution Process (CIRP),

the liquidation process, and individual insolvency and bankruptcy.

• Registration and regulation of service providers for the insolvency process, including Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs), Information Utilities (IUs), Registered Valuers (RVs), and Registered Valuer Organisations (RVOs).

• Oversight of markets and service providers through surveillance, investigation, and grievance redressal.

• Enforcement of regulations for service providers and adjudication, if necessary, to ensure their orderly functioning.

• Professional development of expertise through education, examination, and training.

Constitution of IBBI:

• Section 189 of the IBC provides for the constitution of the IBBI. 

• The members of IBBI are appointed by the central government.

The IBBI shall consist of:

i) A chairperson.

ii) Three ex-officio members from among the officers of the central government not below the rank of Joint Secretary or equivalent, one each to represent the Ministries of Finance, Corporate Affairs, and Law.

iii) One ex-officio member nominated by the Reserve Bank of India (RBI).

iv) Five other members nominated by the central government, of whom at least three are full time members.