Corporate Insolvency in India: Creditor Control and its Comparative Discontents

The Insolvency and Bankruptcy Code, 2016 rebuilt Indian insolvency law around a single idea: the creditor decides. A committee of financial creditors, voting by value, now holds the fate of a defaulting company, while the former managers are displaced and, where they have defaulted, barred outright from buying their way back. This creditor in control design was a deliberate rejection of the management friendly model that had failed India for decades. The official defence of the model rests on a striking statistic. Creditors recover only about a third of what they are owed, a haircut of roughly two thirds, yet they recover well over one and a half times what the company would fetch in liquidation. This paper argues that the second figure has quietly become the system's measure of success, and that this is the heart of the problem. By benchmarking itself against liquidation value rather than against the debt actually owed, the creditor control model has redefined success downward to the very floor it was built to rise above. Drawing on the latest official data, on the dominance of liquidation as the actual terminal outcome, and on a comparison with the debtor in possession tradition of the United States and the rescue oriented restructuring regime of the United Kingdom, the paper contends that the costs of creditor control are not incidental defects but the predictable product of where the Code placed power. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, which both tightens creditor control and, for the first time, admits a limited debtor in possession element, is best understood as the legislature's own admission that the model needs the very correction its critics have urged. The discontents of creditor control have moved from the academic literature into the statute book.