Insolvency and Bankruptcy Code (IBC): NCLT Process and the 2026 Amendment

Core Concept

The Insolvency and Bankruptcy Code (IBC), 2016 is India's unified, time-bound law for resolving corporate and individual insolvency, replacing a fragmented regime under SARFAESI, SICA, and the Companies Act's winding-up provisions. It created a market-driven, "resolution first, liquidation last" process: once a default is established, control of the defaulting company shifts from its promoters to a creditor-led Committee of Creditors (CoC), assisted by an Insolvency Professional (IP), which must either revive the firm through a resolution plan or send it to liquidation — all adjudicated by the National Company Law Tribunal (NCLT), with appeals lying to the NCLAT.

Key Points

• The Corporate Insolvency Resolution Process (CIRP) is triggered by a default of ₹1 crore or more (this threshold was raised from ₹1 lakh in 2020); the CoC, made up of financial creditors, approves a resolution plan with a 66% voting majority.

• The statutory CIRP timeline is 330 days (180 days + a 90-day extension + litigation time, as capped by the Supreme Court's Essar Steel judgment), but it has been routinely breached in practice — actual resolution has often taken 600-700+ days because of NCLT bench vacancies and heavy litigation.

• A Pre-Packaged Insolvency Resolution Process (PIRP) has existed for MSMEs since 2021, allowing debtor-in-possession negotiation with creditors before a formal CIRP is triggered, but its uptake has stayed low.

• When resolution fails, liquidation proceeds under a Liquidator's supervision, with proceeds distributed per the Section 53 "waterfall": process costs first; then workmen’s dues for the preceding 24 months and secured creditors relinquishing security; other employees’ dues for 12 months; unsecured financial debts; government dues for two years together with secured shortfalls after enforcement; remaining debts; preference shareholders; and equity shareholders or partners. Under the 2026 clarification, a relinquishing creditor ranks as secured only to the value of the security, with the remainder unsecured.

• Even as cumulative creditor recovery has crossed roughly ₹4 lakh crore and over 1,300 companies have been rescued since 2016, average creditor haircuts have stayed steep, often in the 70-95% range.

Memory Trick

Default → admission → resolution professional and CoC → resolution plan, or liquidation if resolution is unsuccessful. Remember the eight rungs of Section 53 separately: costs, workmen/secured, employees, unsecured financial, government/secured shortfall, residual debts, preference, equity. The 180-day CIRP period and its permitted 90-day extension are not liquidation timelines.

Current Relevance (2026)

The IBC (Amendment) Act, 2026 received Presidential assent on 6 April 2026. Its creditor-initiated framework and amendments to liquidation rules require careful reading of the enacted text and commencement notifications. Section 53 clarifies the treatment of relinquished security and government claims; do not describe government dues as the final tier.

Revision Chart: Sources

Chart and factual corrections checked on 17 October 2026.

• IBC — India Code

• 2026 Amendment Act — IBBI