Guide
The Insolvency Playbook
A plain-language series on how corporate insolvency actually works in India, one topic at a time.
A plain-language series on how corporate insolvency actually works in India, one topic at a time.
When a company can’t pay its debts, most people’s first assumption is that it simply shuts down. Under India’s Insolvency and Bankruptcy Code, 2016 (IBC), that’s actually the last resort, not the first step. This guide walks through what actually happens, in the order it happens, with links to tools you can use to go deeper on any stage.
The Code’s stated preference is resolution, not liquidation: give the company a chance to be revived under new ownership or management, with creditors recovering more than they likely would from a forced sale of assets. Liquidation is what happens when resolution genuinely fails, not the default outcome.
Three categories of applicants can trigger the Corporate Insolvency Resolution Process (CIRP): a financial creditor (typically a lender, under Section 7), an operational creditor (typically a vendor or supplier owed money for goods or services, under Section 9), or the corporate debtor itself (under Section 10). Each route has different procedural requirements — our Section 7 Readiness and Section 9 Readiness tools walk through what each actually needs.
The moment an application is admitted, a moratorium takes effect under Section 14, freezing most legal proceedings against the company and its assets. This is designed to give the resolution process breathing room, but it also means creditors outside the process generally can’t pursue separate recovery action once it begins.
CIRP runs on a strict statutory timeline — 180 days, extendable once by 90 days, with an outer limit of 330 days including any litigation time. Our CIRP Timeline Tool breaks down every stage within that window.
Financial creditors, weighted by debt value, form the Committee of Creditors (CoC) and make the key decisions — confirming the Resolution Professional, evaluating resolution plans, and ultimately voting on whether to approve one or move to liquidation. Our Resolution Process Roadmap covers who does what in more depth.
If the CoC can’t agree on a viable resolution plan within the statutory window, the Adjudicating Authority orders liquidation. This follows its own process and, critically, its own strict priority order for how sale proceeds get distributed — see our Liquidation Timeline for the full sequence, including the Section 53 waterfall.
If you're a vendor or supplier owed money, the process has an extra procedural step most financial creditors don't face: a mandatory demand notice and waiting period before you can even file, plus a dispute check that can derail an application if the debtor raises a pre-existing dispute. Our Operational Creditor Checklist walks through exactly what to have in order.
Future installments will go deeper into specific areas — including how resolution plans actually get valued and negotiated, what personal guarantors face when a principal borrower enters insolvency, and recent NCLAT developments worth knowing about. If there’s a specific topic you’d like covered, let us know.