Three years on, Insolvency and Bankruptcy Code is learning from outcomes, growing stronger

The recent empirical work on links between corporate bond markets and the bankruptcy system predicts that safe firms will issue bonds but higher risk firms, for whom insolvency is more likely, issue bonds as long as bankruptcy is efficient.

The recent empirical work on links between corporate bond markets and the bankruptcy system predicts that safe firms will issue bonds but higher risk firms, for whom insolvency is more likely, issue bonds as long as bankruptcy is efficient. (Illustration: C R Sasikumar)

In 2016, India embarked on a landmark reform of providing a robust platform for resolution of troubled corporate entities. In principle, insolvency and bankruptcy are covered in the Seventh Schedule under the Concurrent List in the Constitution, allowing both states and the Centre to develop the legislative framework. However, in India, there is no state legislative history regarding either insolvency or bankruptcy in the post-Independence period, an important departure from the US. All such Indian post-Independence laws have their origins in UK laws.