Can India's New Insolvency Law Outrun Its Courts?

Jet Airways has not carried a passenger since April 2019. For most of the seven years since, its grounded fleet has sat as a kind of open-air museum exhibit to a promise India’s insolvency law made and did not keep: that a viable business, once it stumbles, can be nursed back to health inside a court-supervised process rather than left to rot. The Jalan-Kalrock Consortium won the right to revive the airline in 2021, was handed a resolution plan the Committee of Creditors had approved, and then spent the better part of five years failing to actually implement it — infusing a fraction of the promised capital, trading accusations with lenders, and litigating the question of whether a performance bank guarantee could substitute for real money. In November 2024, the Supreme Court finally ran out of patience, ordered the guarantee encashed, forfeited the money the consortium had put in, and sent Jet Airways to liquidation. Five years of “resolution” had resolved nothing except to confirm, in the most visible way possible, that India’s flagship bankruptcy law had become extremely good at admitting cases and remarkably bad at closing them. That is the backdrop against which Parliament passed the Insolvency and Bankruptcy Code (Amendment) Act, 2026 earlier this year, and it is worth stating plainly what the amendment is trying to do and why it is largely right to try: it trades discretion for deadlines, on the theory that an insolvency process which cannot finish on time is not really a resolution process at all, it is a waiting room. The trouble is that Parliament has fixed the clock without fixing the courtroom, and a faster deadline enforced by the same overstretched tribunals risks becoming this decade’s version of the same failure, only dressed in more urgent language.

It helps to remember what the Code was supposed to be when it arrived in 2016. The Supreme Court, upholding its constitutionality in Swiss Ribbons Pvt. Ltd. v. Union of India in January 2019, described its purpose in terms that read almost tender for a commercial statute: the primary focus of the legislation, the Court held, is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. That is not a recovery statute dressed up in politer language — it is, in the Court’s own framing, an attempt to keep companies alive, save jobs, and preserve enterprise value, with creditor recovery as a byproduct rather than the point. It is a genuinely ambitious idea, and for a while it looked like it might work: bad-loan recognition improved, defaulting promoters who had spent decades treating banks as a permanent line of credit suddenly had a reason to negotiate, and the country’s largest steel, cement and infrastructure insolvencies did get resolved, if slowly. But ambition and arithmetic eventually collided. The Code promises resolution within 330 days. By the government’s own reckoning in the FY26 numbers, the average case was taking 744 days — more than double the statutory limit — and that average was still rising, not falling. The National Company Law Tribunal, the forum where every one of these cases must be admitted and supervised, had roughly 30,600 matters pending as of last year, according to the Economic Survey, a backlog that independent analysts have said could take the better part of a decade to clear at current disposal rates. Recovery rates for creditors, meanwhile, had fallen to roughly 23 percent of admitted claims in FY26 — a haircut in the range of 67 to 70 percent on average, and considerably worse in specific large cases — which is a polite way of saying that banks were, more often than not, getting back less than a third of what they were owed, years after they were owed it.

Jet Airways is not an outlier in that data, it is the data made visible. And it is precisely that visibility — a national airline’s aircraft rusting on tarmacs while lawyers argued about bank guarantees — that gave the 2026 amendment its political momentum. What Parliament actually changed is worth walking through, because the changes are more structural than cosmetic. Admission of an insolvency application, once a discretionary step at which the NCLT could examine and question a claimed default, must now happen within 14 days where default is established, sharply narrowing the room for a tribunal to sit on a filing. A new mechanism — the Creditor-Initiated Insolvency Resolution Process — lets certain classes of financial creditors begin the process without going through the court-admission stage at all, effectively privatising the trigger for insolvency in a way the original Code never contemplated. Liquidation, once open-ended in practice even though the law suggested otherwise, is now capped at 180 days with a possible 90-day extension, a real deadline with teeth rather than an aspiration. The look-back period during which past transactions can be clawed back as fraudulent or preferential has been extended, giving resolution professionals more room to chase assets that were moved before insolvency was declared. And a new provision lets the central government frame rules for cross-border insolvency by notification, filling a gap that had been debated since 2016 without ever being legislated. Taken together, this is not a tinkering amendment. It is a genuine philosophical shift, from a code built around adjudicated discretion — let the tribunal look closely, weigh the facts, protect a genuinely viable business from a hasty filing — toward a code built around enforceable timetables and creditor initiative. The government’s argument, made by Finance Minister Nirmala Sitharaman when she piloted the bill through the Lok Sabha, was that the Code was never meant to function as a mere debt-recovery mechanism, and that speeding up the process is what actually protects its rehabilitative purpose, because a company left to languish for years under an unresolved filing is not being rescued, it is being embalmed.

There is something to that argument, and business owners, compliance teams, and restructuring lawyers should take it seriously rather than dismiss it as bank-friendly politics. A defaulting promoter who could previously stretch out the admission stage with procedural objections now has fourteen days to make peace with reality. A resolution professional chasing assets siphoned out of a company before insolvency now has a longer runway to find them. A creditor who has waited years for a tribunal to simply say yes, this default happened, can in some cases skip that gate altogether. For an MSME supplier waiting on payment from a larger, slow-walking buyer, a faster admission timeline is not an abstraction, it is the difference between staying solvent and not. None of this is trivial, and none of it deserves to be waved away as procedural fetishism.

It is worth pausing on the irony that, even as the amendment tightens the timeline for everyone else, it quietly removes one of the few fast-track options that existed for the smallest debtors. The pre-packaged insolvency resolution process introduced in 2021 specifically for MSMEs had barely been used — an IBBI study this year counted just 14 filings in five years — and the 2026 changes fold that lightly-travelled road into the general regime rather than fixing why nobody used it in the first place, which by most accounts was that even a “fast” process still had to pass through the same starved tribunals as everything else. That is a small detail next to CIIRP and the new liquidation caps, but it captures the amendment’s central limitation in miniature: Parliament redesigned the road without asking why traffic on it had never moved.

There is also a comparative point worth making briefly, because it clarifies what is actually scarce here. The United States runs a dedicated bankruptcy court system, staffed by judges who do nothing else, precisely because Chapter 11’s automatic stay and reorganisation machinery only work if a debtor can get a hearing within days, not months. Singapore, competing openly for restructuring business after its 2017 reforms, backed its faster timelines with a correspondingly resourced insolvency bench inside its High Court. In both cases, the lesson was the same one India’s own Standing Committee on Finance has now made explicit: an insolvency law is only as fast as the court asked to run it. Deadlines are cheap to legislate and expensive to enforce, and the enforcement cost is measured in judges, registries and case-management staff, not in amendments to a bare parliamentary text.

But the amendment’s critics, in Parliament and outside it, have raised an objection that deserves a straight answer rather than a strawman. Opposition members during the debate — Sukhendu Sekhar Ray among the most detailed of them — cited figures putting admitted NCLT cases at roughly 8,659 as of September 2025, of which only 3,865 had actually been resolved, with haircuts running as high as 81 to 83 percent in some matters and public banks estimated to have forgone something in the order of eight lakh crore rupees in value since the Code’s inception. Sanjay Singh’s sharper framing — that the system disproportionately benefits large defaulters while banks and, ultimately, depositors absorb the loss — is a political line, but it rests on a real pattern: the biggest haircuts have tended to fall on the biggest, most politically visible defaults, not the small ones. The more structural version of the criticism, raised by the Standing Committee on Finance itself, is the one that should worry anyone reading the amendment closely: none of these changes add a single additional NCLT bench, tribunal member, or trained registry staffer. India currently runs sixteen NCLT benches with thirty individual courts to handle the entire national caseload, and fewer than half of the more than four thousand registered insolvency resolution professionals are actually taking on active assignments. A fourteen-day admission deadline is only meaningful if there is a bench available to hear the matter within fourteen days. A 180-day liquidation cap only holds if the liquidator’s applications for directions do not themselves sit in a queue behind thousands of other filings. Legislating a faster clock does not, by itself, build a faster court, and the amendment is disarmingly silent on the one bottleneck that every serious study of the Code’s failures — including the government’s own Economic Survey — keeps identifying as the actual constraint. That is not a reason to oppose the reform. It is a reason to be honest about what it can and cannot fix on its own.

The most useful way to read the 2026 amendment, then, is not as the arrival of a solved problem but as a wager that tighter deadlines will force institutional capacity to catch up to legislative ambition, the way a hard exam date forces a student to actually study rather than an argument that the exam itself teaches the material. Sometimes that wager pays off; India’s own experience with fast-track corporate registrations and time-bound tax assessments suggests that statutory deadlines, rigorously enforced, really can concentrate administrative minds. But it is also possible to set a deadline that simply gets missed with more legal cover than before, and CIIRP in particular deserves scrutiny on exactly this point: taking the admission decision away from a tribunal and handing the trigger to creditors reduces one kind of delay while creating a new question — who protects a company facing a CIIRP filing that is commercially aggressive rather than genuinely warranted, when the safeguard of judicial scrutiny at the gate has been narrowed precisely to speed things up? The amendment’s drafters would say the resolution process itself, and eventual adjudication, still provides that check. Perhaps. But a check that arrives after the fact is a different thing than a check that arrives before the harm is done, and the distance between those two is exactly the distance the Jet Airways saga travelled before anyone stopped it.

None of this means the reform was the wrong call. An insolvency code that takes 744 days to do what it promised in 330, that returns 23 paise on the rupee where it once returned more, and that let one airline’s revival plan drift for five years before a court intervened, was a code that had stopped functioning as the rescue mechanism Swiss Ribbons described and had started functioning as an expensive form of corporate hospice care. Forcing speed onto that system was not optional, it was overdue. What Parliament has not done — and what no amendment to the text of a code can do by itself — is hire the judges, staff the registries, and build the tribunal capacity that a fourteen-day admission deadline and a hundred-and-eighty-day liquidation cap actually require to mean something. Until that investment shows up in the next budget rather than the next amendment, the honest prediction is not that India’s insolvency crisis has been fixed, but that it has been rescheduled. The next grounded airline, the next stalled resolution plan, the next five-year wait for a tribunal to say what everyone already knows, will not be a sign that the 2026 reform failed on its own terms. It will be a sign that Parliament changed the deadline without changing what stands between a filing and the bench that has to hear it — and that the real insolvency crisis in India was never really about the law on paper at all.