Towards a fair, efficient insolvency regime

📌 Summary:

• Context: India's Insolvency and Bankruptcy Code (IBC) has long struggled to balance preserving distressed firms against protecting creditors' interests
• Core argument: this tension is the 'Chakravyuha Challenge' — the economy eases a firm's entry but builds formidable barriers to its exit
• Causal chain / evolution: from the Sick Industrial Companies Act (debtor-in-possession, prone to promoter misuse) to the IBC's creditor-in-control model; yet IBC's time-bound resolution has been undermined by protracted litigation and procedural lapses
• New step: the 2026 IBC Amendment introduces the Creditor-Initiated Insolvency Resolution Process (CIIRP), a hybrid blending debtor-in-possession with creditor-in-control features
• Flaw flagged: CIIRP restricts initiation rights to a narrow class of 'notified financial institutions', inviting constitutional challenge and economic inefficiency
• Implied solution: broaden eligible initiators and cure procedural delays to make resolution genuinely time-bound and equitable

🎯 UPSC Relevance: GS3 Economy — financial-sector reform, ease of doing business, NPAs and creditor rights; design trade-offs in insolvency law.

📝 Prelims Facts:

• IBC enacted in 2016; adjudicating authority is the NCLT (appeals to NCLAT)
• 2026 Amendment introduces CIIRP (Creditor-Initiated Insolvency Resolution Process)
• IBC shifted India from a debtor-in-possession to a creditor-in-control framework

🔑 Key Term: Creditor-in-control — an insolvency model where creditors (not incumbent promoters) drive the resolution of a distressed company.