GSTAT’s Real Challenge Is Not Backlog – It Is Transition!
C A Dhanashree Prabhu, Surya Prakash B S, Jatin Christopher & Vivek Jalan
July 29, 2026
Table of Contents
I. Introduction
When Parliament enacted the Insolvency and Bankruptcy Code, 2016 (IBC), it did so with utmost urgency. India’s Non-Performing Asset (NPA) crisis had reached a point where the gross NPAs of scheduled commercial banks touched ₹9.5 lakh crore (approximately USD 130 billion) by March 2018, representing nearly 11.2% of total advances.[1] The average time to resolve insolvency in India before 2016 exceeded four years, compared to a global average of 1.7 years.[2]
A decade on, the results are instructive and in many ways, sobering. The average time for resolution under the IBC, as of December 2024, stands at approximately 716 days, well beyond the 330-day outer statutory ceiling prescribed under Section 12 of the Code.[3] Of 7,145 admitted cases since inception, around 1149 have resulted in approved resolution plans, while over 2,100 ended in liquidation.[4]
The United States: The Debtor-in-Possession Model
The United States Bankruptcy Code, codified under Title 11 of the United States Code, has long set the global benchmark for corporate restructuring. Its flagship provision, Chapter 11, operates on a debtor-in-possession (DIP) model, meaning the debtor’s management retains control of the business during restructuring, which is unless its displaced by a court-appointed trustee for fraud or gross mismanagement.[5] The DIP model carries a powerful institutional logic: those who know the business best continue running it. Critically, Chapter 11 permits super-priority DIP financing under Section 364(d), where new lenders can prime existing secured creditors, a mechanism absent in Indian law that handicaps the ability to raise rescue financing post-admission. The US also allows pre-packaged bankruptcies (“pre-packs”), where a restructuring plan is negotiated with key creditors before formal filing, dramatically compressing timelines. The average Chapter 11 case resolves in approximately 17 months.[6]The United Kingdom: Flexibility Through Administration
The United Kingdom’s insolvency framework, governed principally by the Insolvency Act 1986 and significantly enhanced by the Corporate Insolvency and Governance Act 2020 (CIGA), is notable for its structural flexibility. The UK Administration procedure (Schedule B1, Insolvency Act 1986) places an Administrator, an insolvency practitioner, in control of the company, creating a moratorium against creditor enforcement.[7] CIGA 2020 introduced two landmark mechanisms: a freestanding moratorium (modelled in part on the IBC’s moratorium under Section 14) and a Restructuring Plan under Part 26A of the Companies Act 2006. The Restructuring Plan is particularly consequential, it allows cross-class cram-down, meaning a dissenting class of creditors can be bound to a plan if at least one class in-the-money approves and the court is satisfied that the dissenters are no worse off than in the relevant alternative (usually liquidation).[8]Germany: The ESUG and Debtor-Friendly Rehabilitation
Germany’s Insolvenzordnung (InsO), as amended by the Act to Further Facilitate the Restructuring of Companies (ESUG, 2012), moved German law significantly toward debtor-friendly rehabilitation. The ESUG introduced the Schutzschirmverfahren (protective shield procedure), a debtor-in-possession proceeding allowing companies to restructure under their own management while shielded from creditor enforcement for up to three months, akin to an expedited Chapter 11.[9] Germany’s recovery rate in insolvency proceedings averages around 82.2 cents on the dollar, among the highest in the OECD, reflecting both legal efficiency and the depth of German insolvency practitioner expertise.[10] Singapore: The Asian Restructuring Hub Singapore’s reforms under the Companies (Amendment) Act 2017 and the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) were deliberate attempts to position the city-state as Asia’s restructuring hub. Singapore borrowed heavily from US Chapter 11, introducing DIP financing, pre-packaged schemes of arrangement, and a rescue finance priority mechanism.[11] Critically, Singapore enacted Section 71 IRDA, which enables cramdown of dissenting creditor classes in schemes of arrangement, directly modelled on UK Part 26A. More consequentially for regional relevance, Singapore courts can grant recognition to foreign restructuring proceedings under the UNCITRAL Model Law on Cross-Border Insolvency, a framework India has not adopted. The World Bank’s Doing Business Report (prior to its discontinuation) had ranked Singapore 27th for resolving insolvency, with a recovery rate of 88.7 cents on the dollar. India, by comparison, stood at 52nd with a recovery rate of approximately 26.5 cents, a striking differential.II. Structural Observations: Where Does India Stand?
The most significant structural gap in India’s IBC, when compared internationally, relates to three interlinked deficiencies:
First, the absence of DIP financing. The IBC permits interim finance under Section 33(4) read with Regulation 38A of the CIRP Regulations, but it does not confer super-priority or enable priming of existing security interests. This weakens the ability to fund operations during CIRP, particularly in capital-intensive industries. The Insolvency Law Committee’s 2022 Report recommended enabling DIP financing with priority status, a reform still awaiting legislative action.[15]
Second, NCLT capacity constraints. As of October 2024, India has 16 NCLT benches handling approximately 13,000+ pending matters.[16]
Third, value destruction in liquidation. The IBC’s liquidation waterfall under Section 53 ,which places workmen’s dues and secured creditors above other stakeholders, has in practice produced poor outcomes. Of the 2,100+ companies that have entered liquidation since 2016, realisation has averaged approximately 18-22% of admitted claims, a stark indictment when compared to Singapore’s 88.7% or Germany’s 82.2% recovery rates.[17]
