Blitz Bureau
NEW DELHI: India’s ease-of-doing-business story was never meant to be judged only by how quickly a company could be opened. The harder test was always at the other end: when a business fails, can the system rescue value, protect creditors, safeguard buyers and move assets back into productive use without years of decay?
That is where insolvency becomes the real stress test of reform. And on that test, India’s record is respectable, but still incomplete.
The World Bank’s Business Ready framework puts it neatly: “The purpose of an efficient insolvency framework is to ensure that nonviable firms are swiftly liquidated, and viable firms are effectively restructured in a sustainable way.”
By that standard, India has certainly moved beyond the bad old era of drift and legal chaos. But it has not yet built a system that works with equal speed and credibility across sectors.
There is no denying that the Insolvency and Bankruptcy Code, 2016 was one of India’s boldest structural reforms. It replaced a fragmented and largely ineffective regime with a single framework for corporate distress. It changed borrower behaviour, strengthened creditor rights and created a recognisable market for stressed assets.
The gains show up in the numbers. The Insolvency and Bankruptcy Board of India’s annual report for 2024-25 says that 259 resolution plans were approved during the year, taking the total number of corporate resolutions under the Code to 1,194. These resolved cases led to a realisation of about Rs 3.89 lakh crore for creditors, equal to 32.8 per cent of admitted claims and 170.1 per cent of liquidation value.
No country can claim full success on resolving insolvency if the institutions around distress are weak, fragmented or slow. In India, that weakness is visible in real estate, infrastructure, power, MSMEs and even asset-light service sectors.
A strong insolvency law has changed behaviour, but delays, weak regulators and overloaded tribunals still erode value.
That is not trivial progress. Before the IBC, insolvency in India often meant years of erosion, overlapping jurisdictions and a near-certain destruction of value. The Code changed that psychology. Default was no longer a costless waiting game.
When time is of the essence
The trouble is that insolvency reform works only if it works fast. A distressed company is not a frozen asset. It loses value with every passing month. Workers leave, suppliers disengage, customers move away, litigation multiplies and operating assets deteriorate.
That is why delay remains the central flaw in India’s insolvency story. Parliamentary scrutiny of the proposed 2025 amendments to the IBC acknowledged the problem directly, stressing the need for time-bound admission and warning that appellate delays risk undermining “the efficiency and certainty of the insolvency resolution process.”
This is the gap between legislative success and operational success. India now has a modern insolvency code. What it still lacks is a consistently time-bound insolvency culture.
The bigger point is that insolvency outcomes do not depend on the IBC alone. They depend on the wider regulatory and adjudicatory ecosystem. And this is where India’s performance becomes patchier.
A country cannot claim full success on resolving insolvency if the institutions around distress are weak, fragmented or slow. In India, that weakness is visible in real estate, infrastructure, power, MSMEs and even asset-light service sectors.
The World Bank’s Business Ready framework reflects this broader view. It does not look only at formal rules; it also examines public services and operational efficiency in practice. That is exactly the lens through which India’s insolvency regime now needs to be judged.
Real problem in real estate
Real estate is perhaps the clearest example of how weak regulation can deepen insolvency failure.
Real Estate Regulatory Authority (Rera) was supposed to be the preventive watchdog. It was meant to force project registration, improve disclosures, enforce escrow discipline and provide buyers a forum for relief before projects turned into financial wreckage. But its functioning has varied sharply across states, and in many places it has failed to inspire confidence.
The Supreme Court’s recent frustration was unusually blunt. In February 2026, Chief Justice Surya Kant said it was “high time” for states to revisit these authorities, adding that Rera in many places was “doing nothing except facilitating the defaulting builders.”
That remark matters because real-estate insolvency rarely begins at the insolvency stage. It begins much earlier, when projects are delayed, disclosures fail to deter misconduct, and enforcement is too weak to protect homebuyers.
By the time the matter reaches IBC, the original regulatory breakdown has already taken place. What follows is not just a debt-resolution problem but a social and legal tangle involving homebuyers, lenders, developers, land issues and state-level approvals.
In other words, weak Rera functioning does not simply coexist with insolvency stress. It helps create it.
The IBC also struggles in sectors where financial distress is inseparable from regulatory uncertainty.
Core projects suffer too
In infrastructure and construction, projects are often entangled in arbitration, land disputes, delayed payments from public agencies, concession issues and unfinished works.
A road, port-linked asset or engineering project cannot be sold as neatly as a factory with clean title and a single lender group. Resolution becomes slower because the asset is tied to regulatory permissions and contract disputes outside the immediate control of creditors.
Power is even trickier. A distressed power project may be technically viable, but a bidder will still hesitate if tariffs are disputed, fuel linkages are uncertain, power purchase agreements are weak, or distribution companies are shaky counterparties. The problem here is not merely insolvency law. It is regulatory coordination.
That is why these sectors often produce disappointing outcomes. The company may still have economic value, but the regulatory fog around it erodes bidder appetite and stretches timelines.
No discussion of insolvency efficacy can avoid the National Company Law Tribunal (NCLT). Though it is an adjudicatory body rather than a regulator, the NCLT is the operational heart of IBC. And it remains overloaded.
Delays in admission, disputes over claims, litigation on plan eligibility, valuation battles and appellate challenges all pile up in a system that is expected to move far faster than it often can.
This matters because a modern insolvency regime depends less on statutory elegance than on institutional capacity. The Code promised speed; the tribunal system often cannot deliver it at the required scale.
A lot of the public debate around insolvency focuses on large corporate cases. But the quieter failure zone lies elsewhere.
For MSMEs, the formal insolvency route is often too expensive, too technical and too slow relative to the size of the enterprise. Many smaller firms do not have the records, advisory support or bidder interest needed for meaningful rescue. By the time the process begins, there is often little value left to preserve.
Servicing a resolution
The problem is similar in services, especially asset-light businesses. Retail chains, hospitality firms, logistics operators and technology-led service companies depend heavily on continuity, customer relationships and staff retention. If a resolution drags on, the value evaporates fast. In such cases, delay is not just procedural inefficiency. It is economic destruction.
The IBC numbers deserve respect, but also perspective. Recoveries of 32.8 per cent of admitted claims are better than the pre-IBC regime, but they still imply steep aggregate haircuts. The stronger figure against liquidation value shows that resolution remains better than breaking everything up and selling the pieces. But that is not the same as saying value is being preserved early and efficiently. Often, it is simply being salvaged late.
That distinction is crucial. An insolvency framework should not merely improve on liquidation. It should maximise the chances of timely restructuring, protect going-concern value and reduce avoidable destruction.
So has India delivered on resolving insolvency as a key measure of ease of doing business? The answer is only partly.
It has delivered a credible law. It has improved creditor discipline. It has created a framework that is far stronger than what existed before 2016. But it has not yet delivered a fully integrated system in which tribunals, regulators and sectoral authorities work in concert to produce fast, predictable and value-preserving outcomes.
That is the real weakness. India has reformed the statute book faster than it has reformed the delivery machinery.
Look beyond recoveries
The way forward to make the reform work is as follows:
First, speed must become non-negotiable. Time-bound admission and tighter appellate discipline are essential if the Code is to recover its original spirit. The ongoing amendment push is therefore important, but it must translate into actual practice.
Second, the NCLT needs significantly greater capacity. More benches, more members and tighter case management are no longer optional.
Third, India needs sector-specific resolution templates. Real estate, power, infrastructure and MSMEs are not the same problem wearing different clothes. They require different tools, faster regulator coordination and more flexible restructuring routes.
Fourth, regulators must be judged by enforcement, not only by existence. A regulator that registers projects, issues circulars and hosts a portal but cannot prevent chronic delay or protect stakeholders in time does not improve the business climate in any meaningful sense.
Finally, India should judge insolvency not just by recoveries, but by broader economic outcomes: how many firms remain going concerns, how many projects are completed, how many jobs are saved, and how much confidence the system generates for fresh investment.
India’s insolvency regime is therefore neither a failure nor a finished success. It is a serious reform whose promise still exceeds its performance.
And that, in the end, is the real ease-of-doing-business story: not whether India has an insolvency law, but whether the state can make that law work when business failure puts the whole system on trial.