As a practitioner of the law for over three decades, I have witnessed the Indian corporate landscape undergo seismic shifts. Perhaps none was as ambitious as the introduction of the Insolvency and Bankruptcy Code (IBC) in 2016. It was heralded as the “silver bullet” for India\u2019s non-performing asset (NPA) crisis, a legislative masterpiece designed to move the country from a “debtor\u2019s paradise” to a “creditor-led regime.” However, the recent proceedings in the Lok Sabha regarding the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, suggest that the sheen is wearing off. The opposition\u2019s scathing critique\u2014labeling the code a failure and a tool for “ripping” assets\u2014demands a profound legal and systemic post-mortem.<\/p>\n
The 2025 Amendment Bill, brought afresh following recommendations from a Select Committee, arrives at a time when the insolvency ecosystem is at a crossroads. While the government defends the code as a success in progress, the opposition\u2019s arguments highlight structural vulnerabilities that we, as legal professionals, have grappled with in the halls of the National Company Law Tribunal (NCLT) for years. The core of the debate rests on a fundamental question: Has the IBC lived up to its objective of value maximization, or has it become a legalized mechanism for corporate predation?<\/p>\n
During the debate in the lower house, the phrase “ripping the assets of entities” resonated deeply. From a legal standpoint, this allegation points toward the perceived misuse of the Corporate Insolvency Resolution Process (CIRP). The opposition argues that instead of rehabilitating companies, the IBC is being used by large conglomerates to acquire distressed assets at “throwaway prices.”<\/p>\n
One of the primary metrics for the IBC\u2019s success is the recovery rate for creditors. The opposition members pointed out that in several high-profile cases, financial creditors have accepted “haircuts” as high as 90% to 95%. When a bank or a financial institution recovers only five or ten paise on the rupee, the remaining burden is often borne by the taxpayer and the public exchequer. From a Senior Advocate\u2019s perspective, these massive haircuts undermine the very essence of the “Value Maximization” pillar of the IBC. If the resolution plan offers less than the liquidation value, or barely above it, the process ceases to be a recovery mechanism and starts looking like a subsidized asset transfer.<\/p>\n
The “ripping of assets” claim also touches upon the lack of competitive bidding in several sectors. Opposition members suggested that the process is often skewed in favor of a few dominant players who have the capital to navigate the complex CIRP. When only one or two serious bidders remain in the fray, the Resolution Professional (RP) and the Committee of Creditors (CoC) are often forced to accept suboptimal plans to avoid the “stigma” of liquidation. This leads to a concentration of economic power, which is diametrically opposed to the distributive justice principles enshrined in our legal framework.<\/p>\n
The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, is not merely a routine update; it is an attempt to plug holes identified by the Select Committee. As a Senior Advocate, I analyze these amendments through the lens of legislative intent versus practical application. The bill seeks to introduce more stringent timelines and perhaps a more robust framework for group insolvency\u2014a long-standing demand in the legal fraternity.<\/p>\n
For years, we have seen the difficulty of resolving companies that are part of a larger, interconnected group. The 2025 Bill aims to provide a statutory framework for group insolvency. While the opposition fears this might allow for easier “stripping” of a whole group\u2019s assets, the legal necessity cannot be ignored. In cases like Videocon or the infrastructure giants, resolving one entity in isolation is impossible. The challenge for the legislature is to ensure that group insolvency results in holistic revival rather than a wholesale fire sale.<\/p>\n
The IBC originally envisioned a 180-day process, later extended to 270 and then 330 days. However, the ground reality is that cases often drag on for three to four years. The 2025 Bill attempts to address these delays. The opposition rightly points out that “justice delayed is value eroded.” As a company languishes in the NCLT, its plant and machinery decay, its skilled workforce departs, and its market share vanishes. By the time a resolution plan is approved, the “asset” is often a shell of its former self, providing fodder for the “asset-ripping” argument.<\/p>\n
In the Lok Sabha debate, significant concern was raised regarding the hierarchy of creditors. Under Section 53 of the IBC\u2014the “Waterfall Mechanism”\u2014operational creditors (suppliers, MSMEs, employees) often receive next to nothing. The opposition\u2019s claim that the IBC has failed is most poignant when viewed through the eyes of an MSME owner who loses their entire business because a larger corporate debtor went into insolvency.<\/p>\n
While the Supreme Court in the Swiss Ribbons<\/i> case upheld the distinction between financial and operational creditors, the practical inequity remains a political and legal flashpoint. If the 2025 Amendment does not provide a safety net for operational creditors, the “failure” narrative will continue to gain traction. A law that protects the “big banks” while decimating the “small suppliers” will always struggle for social and political legitimacy.<\/p>\nJudicial Bottlenecks and Administrative Lethargy<\/h2>\n
The opposition members in the Lok Sabha also took aim at the infrastructure of the NCLT. As advocates, we see the vacancies on the bench and the staggering caseload. The IBC is a time-bound law being implemented by a resource-constrained judiciary. This mismatch is where the “failure” occurs. When the NCLT takes six months just to admit a petition (Section 7 or Section 9), the “moratorium” period becomes a limbo that benefits neither the debtor nor the creditor.<\/p>\n
The conduct of RPs has also come under fire. The opposition alleges that some RPs act in cahoots with the CoC or potential resolution applicants. While the Insolvency and Bankruptcy Board of India (IBBI) has been proactive in disciplining errant professionals, the perception of the RP as a “vulture” rather than a “doctor” persists. The 2025 Bill needs to further empower the IBBI to ensure that the “ripping of assets” is not facilitated by those entrusted to protect them.<\/p>\n
To provide a balanced view, one must compare the IBC with the US Chapter 11 or the UK\u2019s Insolvency Act. No system is perfect. The US system is often criticized for being too debtor-friendly, while the UK system is seen as creditor-centric. The IBC was meant to be a hybrid. The opposition’s claim that it has “failed” might be an exaggeration, but their claim that it has “deviated” from its purpose is grounded in statistical reality.<\/p>\n
Statistically, more companies have ended up in liquidation than in successful resolution under the IBC. However, the government argues that many of these companies were already “dead” or “zombies” before they reached the NCLT. As a Senior Advocate, I believe the law should be judged by the quality of the “living” companies it saved\u2014such as Essar Steel or Bhushan Steel\u2014rather than the number of “dead” ones it buried. Yet, when the “burial” (liquidation) becomes a mechanism for asset stripping, the law loses its moral authority.<\/p>\n
The 2025 Amendment Bill must be more than just a procedural facelift. To address the concerns raised in the Lok Sabha, the following reforms are essential from a legal standpoint:<\/p>\n
To counter the “deep haircut” and “asset ripping” narrative, the legislature could consider a minimum recovery floor linked to the fair market value or liquidation value for all stakeholders, ensuring that resolution plans are not predatory.<\/p>\n
The IBC should provide a more protected status for operational creditors who are MSMEs. Their survival is crucial for the Indian economy, and they should not be the primary victims of the waterfall mechanism.<\/p>\n
The bidding process must be made more transparent through a centralized digital platform to prevent cartelization. Real-time tracking of CIRP progress would hold RPs and the CoC accountable to the public and the judiciary.<\/p>\n
No amount of legislative amendment can fix a broken delivery system. The government must double the number of NCLT benches and ensure that technical and judicial members are appointed well in advance of vacancies.<\/p>\n
The debate in the Lok Sabha on the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, serves as a vital reality check. While it is perhaps too harsh to say the IBC has “failed” entirely, it is undeniable that the law is being tested by the complexities of the Indian market. The allegations of “asset ripping” are a warning sign that the “Commercial Wisdom of the CoC” cannot be a blank check for inequity.<\/p>\n
As we move forward, the legal community must advocate for a code that balances the clinical efficiency of debt recovery with the equitable principles of corporate justice. The 2025 Bill represents an opportunity to recalibrate. If the legislature ignores the opposition’s critique, they risk turning a landmark reform into a source of systemic grievance. If they embrace the critique and fortify the code against misuse, the IBC can yet fulfill its promise of being the backbone of India\u2019s economic resilience. The journey from a “tool for stripping” to a “tool for reviving” requires not just new laws, but a renewed commitment to the spirit of the original Code.<\/p>\n","protected":false},"excerpt":{"rendered":"
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