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
I. Abstract
The Insolvency and Bankruptcy Code (IBC) was built upon the recommendations of the BLRC committee led by TK Vishwanathan. The Code’s core principles include time bound resolution, creditor-in-control process and swift resolution1. However, the proposed Insolvency And Bankruptcy (Amendment) Bill, 2025, introduces the Creditor Initiated Insolvency Resolution Process(CIIRP) which pivots back to the debtor-in-control model with some checks and balances2. History shows that debtor-in control model was followed in SICA and led to excessive delays and severe value destruction by allowing defaulting promoters and existing management to remain in control3. While CIIRP is proposed to save time with a 150 day deadline extendable by 45 days and if it does not yield results it is to be converted to regular CIRP. This would just extend the timeline more as, if the CIIRP fails it would get an additional timeline of 330 days. This model does not better the timeline if thought from a worst case scenario point of view as we have seen in the Pre Packaged Insolvency model. The Blog aims to point out the structural issues that the new model proposes.
II. Introduction
The enactment of Insolvency and Bankruptcy Code (IBC), 2016 has been a landmark reform in India’s economic history4. It replaced a fragmented, debtor-leaned regime regime with a streamlined, creditor-led framework with minimal judicial interference. The Insolvency and Bankruptcy Code (Amendment) Bill, 20255, seeks to introduce a new mechanism named Creditor-Initiated Insolvency Resolution Process(CIIRP)6.
Before the IBC, the primary legislation for financially distressed companies was the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA)7. SICA was based on the Debtor-in-Possession model, in which existing management and promoters stayed in control of the company while the Board for Industrial and Financial Reconstruction (BIFR) attempted to revive it.
The Report of the Committee on Industrial Sickness and Corporate Restructuring chaired by Omkar Goswami suggested that the failure of SICA could be attributed to the debtor-in-possession model8.
Promoters often used the stay as a shield from creditors rather than for restructuring. CIIRP proposes a debtor in possession model. By allowing the debtor to stay in control, CIIRP risks re-introducing Information Failure9. When the existing management controls the records, the Resolution Professional and the Committee of Creditors (CoC) often struggle to get a true picture of the company’s health, leading to undervalued resolution plans.
The transition from a Debtor-in-Possession to a Creditor-in-Control model is not merely a procedural change, but change in one of the main principles under which the Insolvency and Bankruptcy Code (IBC), 2016 was made by the Bankruptcy and Law Reforms Committee.
