The Insolvency Code’s progress: From deep haircuts to fuller recoveries

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Subscribe to enjoy similar stories. The Insolvency and Bankruptcy Code (IBC) has long been associated with delays and financial creditors taking significant losses in high-profile corporate insolvencies. In the recent past, various stakeholders including the Parliamentary Standing Committee on Finance, Reserve Bank of India (RBI) Governor Shaktikanta Das and India’s G-20 Sherpa Amitabh Kant have flagged concerns over delays and asked for a recovery boost.

Fortunately, after eight years, as India’s insolvency regime matures, a shift is emerging, with a few recent cases challenging the narrative of poor recoveries. Some large-ticket resolutions, both early on and more recently, show that creditors can recover far more than anticipated—sometimes even more than their admitted claims. When the IBC first came into force in 2016, cases like Monnet Ispat (2018) and Alok Industries (2019) made headlines, although not for reasons that creditors were celebrating.

These cases involved significant haircuts, with creditors losing 70-90% of their admitted claims. This painted a picture of the IBC as a system where creditors bore the brunt of insolvency, often walking away with a fraction of what was owed them. This led to cries for reform in the design of the system.

On the positive side, there were successful cases such as Binani Cement (2018) and Essar Steel (2019) that provided the best possible outcome for all stakeholders, proving that large recoveries were possible in valuable companies. Lenders of Essar Steel, for instance, recovered nearly 90% of their admitted claims. UltraTech Cement’s resolution of Binani Cement yielded more than 100% recovery for creditors, including an important precedent of allowing interest to accrue