Why Bankruptcy and Restructuring in India Is Different
India’s bankruptcy and restructuring regime is distinct from many other jurisdictions because it is built around a creditor-in-control model under the Insolvency and Bankruptcy Code, 2016 (IBC), rather than a debtor-led restructuring process. Once a corporate insolvency resolution process (CIRP) is initiated by the National Company Law Tribunal (NCLT), the powers of the board of directors are suspended and transferred to an Insolvency Professional (IP), who manages the affairs of the company. Commercial decisions regarding the future of the business are taken by the Committee of Creditors (CoC), comprising primarily financial creditors, rather than by the existing management.
Another distinguishing feature is the IBC’s emphasis on strict statutory timelines. The CIRP is intended to be completed within 180 days, extendable to 330 days (including litigation periods) in exceptional circumstances. This reflects the legislature’s objective of ensuring swift resolution and preserving the value of distressed businesses, in contrast to insolvency regimes in some jurisdictions where proceedings may continue for several years.
India also provides a comprehensive moratorium immediately upon commencement of CIRP. During this period, all recovery actions, enforcement proceedings, foreclosures, and legal suits against the corporate debtor are stayed, enabling the company to continue as a going concern while a resolution plan is negotiated.
Unlike jurisdictions where shareholders or management may retain significant influence, the IBC accords primacy to financial creditors. Any resolution plan must receive the approval of at least 66% of the voting share of the CoC before it can be sanctioned by the NCLT. Operational creditors, employees, government authorities, and other stakeholders are protected through statutory safeguards, although they do not exercise the same decision-making powers as financial creditors.
India’s insolvency framework is still relatively young and continues to evolve through frequent amendments and landmark judicial decisions of the Supreme Court of India and the NCLT/NCLAT. As a result, restructuring strategies in India require not only compliance with the statutory provisions of the IBC but also careful consideration of the rapidly developing judicial precedents that shape its practical application.
Insolvency Law Framework in India
India’s insolvency regime is primarily governed by the Insolvency and Bankruptcy Code, 2016 (IBC), which consolidated multiple insolvency laws into a single, comprehensive framework for the timely resolution of financial distress. The IBC seeks to maximize the value of assets, promote entrepreneurship, balance the interests of stakeholders, and improve the ease of doing business. Corporate insolvency proceedings are adjudicated by the National Company Law Tribunal (NCLT), while appeals lie before the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court of India. During the Corporate Insolvency Resolution Process (CIRP), an Insolvency Professional manages the affairs of the corporate debtor under the supervision of the Committee of Creditors (CoC), comprising financial creditors. If a viable resolution plan is not approved within the prescribed timeline, the company proceeds into liquidation. Over the years, the IBC has significantly strengthened India’s restructuring landscape by providing a transparent, creditor-driven, and time-bound insolvency framework.
Debt Restructuring in India
Debt restructuring in India is principally governed by the Insolvency and Bankruptcy Code, 2016 (IBC), together with the rules and regulations framed by the Insolvency and Bankruptcy Board of India (IBBI). The IBC provides a creditor-driven and time-bound framework for restructuring the debts of corporate entities while preserving viable businesses and maximizing value for stakeholders. Corporate insolvency matters are adjudicated by the National Company Law Tribunal (NCLT), with appeals lying before the National Company Law Appellate Tribunal (NCLAT) and ultimately the Supreme Court of India.
The restructuring process is initiated when a financial creditor, operational creditor, or the corporate debtor itself files an application before the NCLT upon the occurrence of a default. Following the 2020 notification under Section 4 of the IBC, the minimum default threshold for initiating corporate insolvency proceedings is INR 1 crore. If the NCLT is satisfied that a default has occurred, it admits the application and commences the Corporate Insolvency Resolution Process (CIRP).
Upon admission, the NCLT declares a moratorium under Section 14 of the IBC, which prohibits the institution or continuation of suits and arbitration proceedings, enforcement of security interests (including under the SARFAESI Act), foreclosure or recovery actions by creditors, and the transfer or disposal of the corporate debtor’s assets. Essential goods and services must continue to be supplied during the moratorium to enable the business to continue as a going concern.
Simultaneously, the NCLT appoints an Interim Resolution Professional (IRP), who assumes control over the management of the company. The powers of the board of directors are suspended and vest in the IRP, who is responsible for taking custody of the company’s assets, collecting financial information, inviting and verifying creditors’ claims, and constituting the Committee of Creditors (CoC). The CoC consists solely of financial creditors, while operational creditors may participate in meetings without voting rights where their aggregate dues meet the statutory threshold.
The CoC subsequently confirms or replaces the IRP with a Resolution Professional (RP). The RP manages the corporate debtor as a going concern, prepares the information memorandum, invites Expressions of Interest (EOIs) from eligible prospective resolution applicants, conducts the due diligence process, and invites submission of resolution plans. Resolution applicants are generally expected to demonstrate financial capability and eligibility under Section 29A of the IBC, which disqualifies certain persons, including wilful defaulters, undischarged insolvents, and defaulting promoters, from regaining control of the distressed company.
Resolution plans commonly include measures such as restructuring existing debt, extending repayment schedules, reduction or waiver of liabilities (subject to creditor approval), conversion of debt into equity or other securities, infusion of fresh capital, sale of non-core assets, changes in management, operational restructuring, mergers or acquisitions, or strategic investment by third parties. Every resolution plan must provide for payment of insolvency resolution process costs in priority, address the claims of operational creditors in accordance with the IBC, and demonstrate that the plan is feasible and capable of implementation.
A resolution plan requires the approval of creditors representing not less than 66% of the voting share of the CoC. Once approved by the CoC, the plan is submitted to the NCLT, which examines whether it complies with the mandatory requirements of the IBC before granting its approval. Upon approval, the resolution plan becomes legally binding on the corporate debtor, its creditors, shareholders, employees, guarantors, government authorities, and all other stakeholders.
The CIRP is intended to be completed within 180 days, extendable by a further 90 days, with the overall process ordinarily not exceeding 330 days, including time consumed in legal proceedings, except in limited exceptional circumstances recognized by judicial precedent. If no compliant resolution plan is approved within the prescribed period, or if the CoC resolves to liquidate the company, the NCLT orders liquidation in accordance with Chapter III of the IBC. The proceeds from liquidation are distributed in accordance with the statutory waterfall mechanism under Section 53 of the IBC, which prescribes the priority of payments among various classes of stakeholders.
The IBC has fundamentally transformed India’s restructuring landscape by shifting control from the debtor to the creditors, introducing strict timelines, enhancing transparency through judicial supervision, and creating a market-driven mechanism for rescuing financially distressed businesses while ensuring an orderly exit where revival is no longer commercially viable.
Business Turnaround & Crisis Management in India
Business turnaround and crisis management in India involve a combination of legal, financial, and operational measures aimed at restoring the viability of financially distressed businesses while minimizing stakeholder losses. Depending on the severity of the financial distress, companies may pursue informal restructuring through negotiations with lenders, debt rescheduling, capital infusion, asset monetization, operational restructuring, or strategic investments. Where consensual restructuring is not feasible, companies may seek formal resolution under the Insolvency and Bankruptcy Code, 2016 (IBC).
A successful turnaround strategy typically includes improving cash flow, optimizing working capital, reducing operational costs, renegotiating contractual obligations, disposing of non-core assets, and strengthening corporate governance. Early identification of financial distress is critical, as timely intervention often enhances the prospects of business revival and value preservation. Professional advisors, insolvency professionals, financial institutions, and legal counsel play an important role in designing and implementing restructuring strategies that comply with applicable laws while protecting the interests of creditors, employees, shareholders, and other stakeholders.
Insolvency Proceedings in India
India’s insolvency framework is designed to prioritize the revival of financially viable businesses while ensuring an orderly exit for those that cannot be rescued. Under the Insolvency and Bankruptcy Code, 2016 (IBC), once insolvency proceedings commence, management of the corporate debtor shifts from its board of directors to an independent Resolution Professional, while key commercial decisions are taken by the Committee of Creditors (CoC). Unlike several jurisdictions where existing management continues to control restructuring, India’s regime places financial creditors at the centre of the decision-making process. Resolution plans are invited through a competitive process, enabling strategic investors to acquire distressed businesses or infuse fresh capital. Promoters who have contributed to the company’s default are generally barred from participating under Section 29A of the IBC. If no viable resolution plan is approved, the company proceeds into liquidation. This creditor-driven and market-oriented approach has significantly enhanced transparency, investor confidence, and the efficiency of corporate restructuring in India.
Distressed Asset Acquisition in India
Distressed asset acquisitions in India present opportunities for investors to acquire businesses, manufacturing facilities, intellectual property, and other strategic assets at competitive valuations. Such transactions may arise from insolvency proceedings, lender enforcement actions, or consensual debt restructuring outside formal insolvency. Unlike conventional mergers and acquisitions, the focus is on identifying commercially viable assets while carefully assessing financial and legal risks associated with the target.
Investors should undertake comprehensive due diligence to evaluate the target’s financial position, contractual obligations, regulatory licences, pending litigation, employee liabilities, tax exposures, and environmental compliance. Particular attention should also be given to sector-specific regulations and foreign investment restrictions where applicable. Effective transaction structuring is essential to allocate risks, preserve key commercial relationships, and facilitate post-acquisition integration. When executed with thorough planning and legal oversight, distressed acquisitions can offer an efficient route for business expansion, market entry, or capacity enhancement while enabling investors to unlock long-term value from financially distressed enterprises.
Our Role as Bankruptcy and Restructuring Law Firm in India
Navigating financial distress requires more than knowledge of insolvency law—it demands a commercially driven strategy that balances legal, financial, and operational considerations. As a bankruptcy and restructuring law firm in India, we work closely with companies, lenders, investors, and insolvency professionals to develop practical solutions tailored to each client’s objectives. Our role begins with assessing the company’s financial position, identifying legal risks, and evaluating restructuring alternatives before formal insolvency becomes necessary.
We advise on debt restructuring negotiations, lender settlements, refinancing transactions, business reorganizations, and distressed M&A opportunities. Where insolvency proceedings are unavoidable, we represent clients throughout the Corporate Insolvency Resolution Process (CIRP), including claim verification, creditor negotiations, preparation and review of resolution plans, litigation before the National Company Law Tribunal (NCLT) and appellate forums, and liquidation proceedings. We also assist foreign investors in evaluating and acquiring distressed assets, conducting due diligence, ensuring regulatory compliance, and structuring transactions that protect commercial interests while maximizing value and facilitating long-term business recovery.
