India’s Insolvency and Bankruptcy Code was promised as a revolution. Nearly a decade in, it has delivered a tribunal that sleeps through hearings, timelines that exist only on paper, and a system where small investors lose everything while banks negotiate in private rooms they are never allowed to enter.
Ramesh Gupta is not a sophisticated investor. He is a retired government schoolteacher from Pune, sixty-three years old, the owner of a fixed deposit and a modest stock portfolio built rupee by rupee across thirty years of careful life. In 2018, on advice that was not unreasonable given the company’s standing, he placed a portion of his savings into shares of Dewan Housing Finance Corporation Limited. DHFL was among India’s largest housing finance companies, a brand synonymous with middle-class aspiration.
What Ramesh Gupta could not have known, because nobody was required to tell him, was that its promoters, the Wadhawan brothers, were operating one of the largest financial frauds in Indian corporate history, siphoning off approximately thirty-four thousand crore rupees through shell companies, fictitious borrowers, and systematic book manipulation. He was an equity shareholder. In the legal hierarchy that determines who gets what when a company collapses, equity shareholders sit at the very bottom, beneath secured financial creditors, unsecured financial creditors, operational creditors, government dues, and every other formal claimant on what remains of the institution.
When the Corporate Insolvency Resolution Process concluded and Piramal Capital and Housing Finance acquired DHFL, his shares were not discounted, not recovered at a fraction, but cancelled entirely, at zero consideration, by order of the NCLT. He challenged this in the Supreme Court, as thousands of small shareholders did. The challenge produced nothing of consequence. He had invested in a fraud he did not commit and a collapse he did not cause, and the law that was meant to bring order to corporate insolvency had decided, quite deliberately, that people in his position did not count.
This is not a sob story. It is a structural indictment, and it is the only honest place to begin, not with the banks, not with the resolution professionals, not with lawyers billing two lakh rupees an hour to file infinite interlocutory applications, but with the man who trusted a regulated market, lost everything to a fraud the system failed to prevent, and was then handed nothing by the law that claimed to govern the aftermath. Ramesh Gupta is not a footnote in India’s insolvency story. He is its truest verdict.
The Insolvency and Bankruptcy Code came into force on 28 May 2016, and for roughly eighteen months it was genuinely exciting. Watching India’s most powerful defaulters, the Essar Steels, the Bhushan Powers, the Jaypee Infratechs, dragged into a process they could not simply bribe or delay their way out of was, by the standards of Indian commercial law, something close to revolutionary. The Reserve Bank of India’s June 2017 directive identifying the dirty dozen, twelve major defaulting accounts representing roughly twenty-five per cent of the entire Indian banking system’s non-performing assets, sent a shudder through boardrooms across the country.
For the first time, a failed company’s promoter was not being offered a restructuring plan quietly negotiated with bankers who feared their own balance sheets more than they feared the law. For the first time, a statutory clock was running: 180 days to resolve, extendable to 90 more, with a hard outer ceiling of 330 days. The Bankruptcy Law Reforms Committee that drafted the code, chaired by T.K. Viswanathan, had been categorical on this point: time is the enemy of resolution value, and a law without enforceable timelines is no law at all. President Pranab Mukherjee signed the code on 28 May 2016. The CIRP provisions activated on 1 December 2016. The world was watching.
The world is still watching. What it has observed in the nine years since should embarrass every minister, every tribunal administrator, and every legislative drafter who stood at a press conference and described the IBC as a game-changer.
In FY2020, the average resolution time under IBC was 375 days, already beyond the 330-day outer limit but at least proximate to it. By FY2023 that figure had climbed to 613 days. By FY2024, to 679 days. By September 2025, to 688 days, and senior lawyers are careful to note that even this figure excludes time spent in litigation and ancillary activities during the CIRP, which can add months or years to the real elapsed duration. The plain-language translation is this: the average insolvency case in India now takes nearly two years to resolve inside a system that promised 330 days as its maximum. That promise has been broken so comprehensively and so consistently that the legal community has largely stopped registering outrage at it. It has simply become the ambient condition of commercial practice in India’s courts.
As of March 2025, 14,961 cases sat pending before the NCLT. The Economic Survey 2025-26, the government’s own publication, warned that at current disposal rates the tribunal would require approximately ten years to clear its backlog. Not an estimate from an aggrieved bar association. The government’s own document. Meanwhile, more than ten lakh crore rupees in recoverable value remains locked in distressed assets that cannot move, because the tribunal designed to unlock them is operating, as of early 2025, with 24 of its 30 courts running on half-day schedules, individual members presiding over multiple courts simultaneously by video conference, and a sanctioned bench strength of 63 members reduced in practice, by vacancies and administrative inertia, to a skeleton crew performing the work of a fully staffed institution. Senior Advocate Ramji Srinivasan, speaking to PTI, chose his words with the precision of someone who has run out of stronger ones: “There is a sense of disappointment.”
A sense of disappointment. A ten-year backlog. Two-year average resolution times in a 330-day system. And somewhere inside all of that, Ramesh Gupta’s shares are at zero.
What is wrong with the NCLT is not a mystery. Lawyers who practise before it, researchers who study it, and bar members who have watched it decline have documented the failures repeatedly and in detail. The diagnosis is not complicated.
The NCLT was created to be a company law tribunal. When the IBC arrived, it imposed upon that institution an entirely separate jurisdiction, insolvency resolution, without any corresponding assessment of what additional bench strength, infrastructure, or specialist training that jurisdiction would demand. What followed was a tribunal overwhelmed by a volume of work it was never designed to absorb, staffed by members not equipped to handle it, housed in buildings not fit to host it. The judicial members of NCLT benches come predominantly from lower courts and carry, in many cases, little to no background in financial law, debt recovery, or the commercial concepts that insolvency resolution requires.
The technical members are described by insolvency practitioners with consistent regularity as retired government officers, career bureaucrats who do not operate at commercial pace, who do not appreciate the urgency of a distressed asset haemorrhaging value every additional day it spends in procedural limbo, and who are, frankly, beyond the point at which they can be retrained at the speed the work requires. Lawyers speaking on condition of anonymity to Asian Legal Business described members sleeping on the bench during hearings, continuances granted for months over errors resolvable in minutes, and tick-box approvals that somehow consume five years.
This is the institution to which India entrusts its most complex, most consequential, most value-laden corporate crises. One where NCLT approval for a resolution plan, characterised by one senior insolvency lawyer as a tick-in-the-box exercise once the Committee of Creditors has acted, routinely takes up to five years to obtain. Where 68 per cent of all CIRPs have missed the statutory 270-day deadline. Where financial creditors, having waited through all of this, recover an average of 33.8 per cent of their admitted claims, a figure propped upward by a handful of large successful resolutions that disguise a base layer of cases in which creditors received next to nothing.
Who built this? Who authorised assigning the full corporate insolvency workload of the world’s fifth-largest economy to a tribunal running at 60 per cent of sanctioned strength, with no specialisation budget, in premises that cause, in the words of the NCLT Bar Association’s own secretary general, immense difficulty for everyone who passes through them?
The answer is the same government that announced, in August 2025, in response to a Lok Sabha question about pending cases, that it is aware of investor concerns regarding resolution delays and has been implementing measures to strengthen NCLT functioning. Six legislative amendments to the IBC. Over a hundred regulatory changes since inception. Awareness. Measures. And a backlog clearing at a pace that will take a decade to exhaust.
The NCLT’s failures of infrastructure and staffing are scandalous, but they are not the deepest problem with India’s insolvency architecture. The deepest problem was engineered into the code from the beginning, celebrated by its drafters as a defining feature, and has proven, for the small investor, to be its most devastating design flaw.
The IBC is, by explicit intent and stated philosophy, a creditor-centric law. The Bankruptcy Law Reforms Committee said so without ambiguity in 2015: when default occurs, control transfers to the creditors, and equity owners have no standing in that process. The Committee of Creditors, composed of financial creditors and in practice dominated by banks, runs the CIRP with full commercial authority. Its decisions are shielded by the doctrine of commercial wisdom, a judicial construction that courts have consistently upheld to mean that as long as the CoC does not violate an explicit statutory provision, its choices are essentially beyond challenge. The CoC meets in private. It votes without publishing its reasoning. It approves resolution plans that determine what survives of the corporate debtor and who receives what consideration.
Equity shareholders, including the retail investors who purchased shares of listed companies in good faith on a SEBI-regulated exchange, are not members of the CoC. They hold no vote. They possess no formal channel for grievance. Their interests, under the IBC as designed and as interpreted, sit at the absolute foot of the waterfall: whatever remains, if anything, after every creditor, every operational creditor, every government claim, and every resolution professional’s fee has been satisfied. In the overwhelming majority of cases, nothing remains.
Consider the practical meaning of this. A retail investor buys shares in a listed company, a publicly regulated instrument traded on a regulated exchange, with all the disclosure obligations that implies. The company’s promoters destroy it, through mismanagement or fraud. The company enters CIRP. The CoC, exercising its commercial wisdom, approves a plan that cancels the public shareholders’ equity at zero consideration, because any payment to shareholders would reduce recoveries for financial creditors, and the CoC is composed entirely of financial creditors. The NCLT approves the plan. The small investor is erased.
This is not theoretical. In DHFL, admitted into CIRP in November 2019 following the country’s largest NBFC fraud, the approved resolution plan reduced paid-up share capital to zero at zero consideration. Thousands of retail shareholders who were victims of the fraud, not its authors, received nothing. In Jaypee Infratech, admitted to CIRP in August 2017 and still moving through resolution seven years later, the resolution plan reduced paid-up share capital to a negligible sum. In Ruchi Soya, when Patanjali Ayurveda prevailed in the bidding, public equity shareholding was reduced to one per cent, with 99 per cent concentrated in the incoming promoter’s hands. Investors who had purchased a publicly traded instrument in good faith were stripped of their ownership and handed a fraction of a fraction.
SEBI, to its partial credit, identified this as intolerable and issued a consultation paper in November 2022 proposing a framework to protect public equity shareholders of listed companies in CIRP, including a requirement that resolution applicants extend a share offer to those shareholders. The framework was eventually adopted in diluted form. It remains contested, underpowered, and in permanent tension with the IBC’s creditor-centric logic, which the courts have consistently treated as the superior principle. The question SEBI’s consultation paper raised but could not resolve, why retail investors and minority shareholders should bear the consequences of defaults caused by majority shareholders and promoters, remains unanswered in law. It has been dressed in a compromise that satisfies nobody.
Then came 2025, and in a single spectacular episode the system demonstrated that it could not be relied upon to deliver even the one thing an insolvency framework must deliver above all others: finality.
Bhushan Power and Steel Limited, one of the RBI’s original dirty dozen, had entered CIRP on 26 July 2017 with admitted financial creditor claims exceeding forty-seven thousand crore rupees. It was among the most prolonged and contentious insolvency processes the code had produced. After multiple bidding rounds, JSW Steel was selected as the resolution applicant. The CoC approved the plan. The NCLT approved it in September 2019. The NCLAT upheld it in February 2020. JSW paid its financial creditors in 2021, its operational creditors in 2022. The company changed hands, began operating under new management, and by every reasonable measure the matter was concluded.
On 2 May 2025, the Supreme Court ordered the entire resolution unwound.
Justice Bela Trivedi’s bench, hearing appeals pending since 2020, found that the CIRP had violated mandatory procedural requirements: the resolution professional had not filed the required Form H compliance certificate, had not properly sought a timeline extension, and had paid operational creditors after financial creditors in breach of the prescribed priority. These were genuine procedural failures, and none disputed them. What the legal community disputed, with rapidly escalating alarm, was the remedy chosen, not a penalty on the resolution professional, not a fine levied on the CoC, not a compliance direction, but the liquidation of a company that had been fully resolved, fully paid for, fully acquired, and operating under new ownership for three years.
The consequences were immediate and severe. Every resolved CIRP in India that had involved delays in implementation, meaning the majority of them, became potentially reversible overnight. Lenders received urgent queries from auditors. Resolution applicants sought legal advice on indemnity exposure and exit routes. NCLT benches across the country began receiving fresh interlocutory applications from erstwhile promoters and operational creditors attempting to apply the Bhushan Power logic to resolutions concluded years earlier. Foreign investors who had been cautiously treating India’s insolvency framework as a viable route to distressed asset acquisition began asking whether any approved and implemented resolution plan could actually be treated as final.
The disorder was sufficient to prompt an unusual response. The Supreme Court recalled its own judgment on 31 July 2025 and reheard the matter. On 26 September 2025, Chief Justice B.R. Gavai’s bench upheld JSW’s resolution plan, and commercial order was restored. Crisis averted, in the narrow technical sense.
But the crisis that was averted is not the one that warrants attention. What warrants attention is that it occurred at all. That a fully implemented resolution, approved at every level of the adjudicatory hierarchy, paid out to creditors and operationally transferred, could be ordered reversed and remained in that condition for four months. That the framework of finality on which investors, bidders, and lenders are asked to place their confidence was shown, in May 2025, to be conditional rather than absolute. That the signal transmitted to every foreign institutional investor and every domestic resolution applicant was precise and unmistakable: the resolution you are considering is not final. It may never be final. Appeals may succeed. The appellate court may be overturned. The Supreme Court may recall its own ruling. And the company you purchased and the consideration you paid may be reclassified from settled facts into open variables at any point across an eight-year legal continuum.
A law that cannot guarantee finality is not a law. It is a labyrinth with a sign at the entrance that reads: Resolution, 330 days.
There is a word at the centre of this failing enterprise. It does not appear in the Ministry of Corporate Affairs’ parliamentary responses. The IBC’s defenders do not apply it to their landmark reform. It is absent from the IBBI’s quarterly publications and from the six successive legislative amendments made to the code since 2016, each presented as a correction, each generating fresh jurisprudential uncertainty in its wake. The word is: fiction.
The 330-day timeline is a fiction. The waterfall hierarchy as a protection for all stakeholders is a fiction. The NCLT as a quasi-judicial authority capable of resolving complex commercial disputes with appropriate speed and expertise is a fiction. The Committee of Creditors as a vehicle for fair resolution, rather than a mechanism for banks to maximise their recoveries from the top of the creditor hierarchy downward, leaving everyone else whatever remains, is, for the small investor, a fiction. The assurance the IBC implicitly extends to anyone who buys shares in a listed Indian company, that the regulatory environment surrounding that investment is coherent, consistent, and protective, is a fiction. And the most costly fiction of all is the claim that insolvency resolution in India is predictable, that a plan approved today can be relied upon tomorrow, that the system can deliver the one quality a system of this kind must possess before anything else: certainty.
Why does a law governing something as consequential as corporate insolvency remain so thoroughly unfit for its purpose? Why, nine years and six amendments in, does a senior advocate describe the NCLT’s functioning as producing a sense of disappointment? Why does the government’s own economic survey project a ten-year backlog without that projection being treated as grounds for emergency intervention? Why does the law that was built to protect the integrity of the resolution process provide no protection to the small investor who is its most defenceless participant? Why is there, even now, no one accountable when a retail shareholder loses a lifetime of savings to a fraud they played no part in?
Because the IBC was constructed to resolve a banking crisis, not an investor crisis. The dirty dozen directed into CIRP by the RBI in 2017 accounted for twenty-five per cent of the Indian banking system’s non-performing assets. The banks required a mechanism. The mechanism was designed for the banks. Every structural choice embedded in the code, creditor-in-control, commercial wisdom of the CoC, equity at the foot of the waterfall, no formal standing for retail shareholders in CIRP proceedings, reflects a single overriding priority: removing bad loans from bank balance sheets. That priority was defensible in 2016, when India’s banking system was under genuine stress. But it generated a law that arranged its hierarchy of interests, its institutions, and its protections entirely around one category of creditor, the large financial institution, and left every other participant to find their own way through whatever that arrangement left behind.
Gross NPAs in Indian banks have declined from 11.2 per cent in 2018 to 2.6 per cent in September 2024. By that metric the IBC succeeded. The banks are in better health. That is worth acknowledging. Now ask Ramesh Gupta of Pune what the improvement cost him personally. Ask the thousands of DHFL retail shareholders whose paid-up capital was extinguished at zero consideration. Ask the Ruchi Soya investors left holding one per cent of what they had owned. Ask the resolution applicant who submitted a good-faith bid for a CIRP asset in 2019 and spent four months in 2025 without knowing whether the Supreme Court would require him to surrender it.
India is the world’s fifth-largest economy, attempting with varying degrees of conviction to position itself as a serious destination for global capital, for institutional investors, foreign direct investors, private equity funds, and distressed asset buyers who retain the option of Singapore, London, Dubai, New York, and numerous other jurisdictions where insolvency outcomes are predictable, enforceable, and durable. Every time the NCLT fails its own statutory timelines, which is to say in 68 per cent of cases, a message is transmitted. Every time a retail shareholder is zeroed without recourse, a message is transmitted. Every time the Supreme Court is compelled to recall its own order because the framework beneath the ruling could not sustain its weight, a message is transmitted. That message does not feature in the government’s investment promotion literature.
What a genuinely investor-protective insolvency system would require is not technically obscure. It would require specialised NCLT benches composed exclusively of commercially trained judges and technical members with demonstrable finance expertise, not retired civil servants assigned to insolvency work by administrative convenience. It would require timelines that are enforceable rather than aspirational, with automatic sanctions on resolution professionals who breach them, automatic fee reductions for duration overruns, and a publicly accessible case-tracking dashboard measuring each proceeding against its statutory clock.
It would require a statutory mechanism, embedded in the IBC itself rather than left to an underpowered SEBI framework, allowing retail shareholders of listed companies to register formal objections in CIRP proceedings and guaranteeing them a minimum return before their equity is cancelled. It would require a clear liability structure for the professionals, the resolution professionals, the CoC advisers, the NCLT members, who permit procedural failures of the Bhushan Power variety to accumulate over eight years without consequence. And it would require finality: an unambiguous legislative declaration that a resolution plan, once approved, implemented, and paid out, is closed, in terms clear enough that no bench can reverse it on a procedural technicality discovered half a decade after the fact.
None of this presents a technical challenge. All of it has required, for nine years, a degree of political will that has not been found.
The Viswanathan committee that drafted the IBC was not incompetent, and the code it produced was not without value. The genuine accomplishments of the IBC, the reduction in bank NPAs, the recovery of value from cases that had seemed entirely beyond salvage, the shift in debtor behaviour that a credible insolvency mechanism generates simply by existing, are real and should not be surrendered to the frustration this critique demands. But accomplishment without accountability is insufficient. A law that functions for banks but not for small investors is not a just law. A tribunal resolving cases in 688 days under a 330-day mandate is not a trustworthy institution. A framework capable of unwinding a completed resolution, even for four months, is not a framework on which investment confidence can rest.
The IBC is not bankrupt. But its promise to the ordinary investor is. Until the law’s architects, administrators, and legislative guardians are prepared to acknowledge that the system they built is failing the people least equipped to absorb that failure, every declaration that India is open for business will carry the same weight as the 330-day promise on page one of a code that has never, in nine years, found the means to keep it.
Who is there to protect Ramesh Gupta? Nobody, at present. That is not an oversight. It is a choice. And choices, in a system that names itself the rule of law, can be unmade, if the people with the authority to unmake them ever decide that they should.
