Bankruptcy and debt laws in India are mainly governed by the Insolvency and Bankruptcy Code (IBC), 2016, which applies to companies, LLPs, partnership firms, and individuals. The IBC provides a structured, time-bound process for resolving insolvency, including the Corporate Insolvency Resolution Process (CIRP) for businesses, and allows creditors to initiate proceedings if a debtor defaults on payments. Other key laws include the Recovery of Debts and Bankruptcy Act, 1993, SARFAESI Act, 2002, and the Companies Act, 2013.
The insolvency resolution process under the IBC involves filing a petition, appointing an Insolvency Resolution Professional (IRP), and forming a Creditors’ Committee to decide on the resolution plan. If no solution is found, liquidation takes place. For individuals and partnerships, Debt Recovery Tribunals (DRTs) manage insolvency cases, and debtors can propose repayment plans or face adjudication.
Recent developments include the Pre-Pack Insolvency Resolution Process (Pre-Pack IBC, 2021), offering faster resolution for MSMEs, and ongoing discussions for refining the IBC to address individual and group insolvency cases. Additionally, borrowers have protection through one-time settlements, debt restructuring schemes, and personal guarantor liability.
