Creditor initiated insolvency

 Based on the article “Creditor-Initiated Insolvency: Cure or Catastrophe?” by Venkateshwara Perumal and Naganathan Iyer, published in Corporate Professionals Today (Vol. 66, May 16–22, 2026), here is a professional review:

Review: Creditor-Initiated Insolvency – Reform or Regulatory Overreach?

The article “Creditor-Initiated Insolvency: Cure or Catastrophe?” presents a thoughtful and incisive examination of the proposed Creditor-Initiated Insolvency Resolution Process (CIIRP) under the Insolvency and Bankruptcy Code framework. At a time when policymakers are searching for solutions to mounting delays within India's insolvency ecosystem, the authors offer a timely critique of a reform that promises efficiency but may ultimately aggravate the very problems it seeks to resolve.

The article begins by contextualising the proposal against the backdrop of increasing stress within the insolvency regime. The authors note the growing backlog of cases before the National Company Law Tribunal (NCLT), the elongation of resolution timelines, and the diminishing recovery rates that have raised concerns regarding the effectiveness of the Insolvency and Bankruptcy Code, 2016. Against this setting, CIIRP is introduced as a mechanism intended to incorporate elements of the Debtor-in-Possession (DIP) model while allowing creditors to initiate proceedings.

One of the article’s principal strengths lies in its structured analysis. The authors first revisit the original promise of the IBC and then systematically evaluate previous reform efforts, including the Pre-Packaged Insolvency Resolution Process (PPIRP), which achieved only limited success. This historical perspective lends credibility to their scepticism regarding another experimental framework being introduced without adequately addressing underlying structural issues.

The discussion on the design of CIIRP is particularly compelling. The authors argue that the model attempts to blend creditor control with debtor management, creating inherent contradictions in governance and accountability. They contend that allowing existing management to retain operational control while proceedings are creditor-driven may create conflicts of interest, increase litigation, and complicate decision-making. The article persuasively suggests that such a hybrid structure risks importing the weaknesses of both creditor-controlled and debtor-controlled systems without fully capturing the advantages of either.

Equally noteworthy is the comparative analysis of international Debtor-in-Possession regimes. Drawing lessons from jurisdictions such as the United States and Singapore, the authors demonstrate that successful DIP frameworks depend upon mature credit markets, sophisticated rescue financing mechanisms, and strong judicial oversight. The article convincingly argues that these preconditions are not yet sufficiently developed in India, making a straightforward transplantation of DIP-inspired concepts potentially problematic.

The article’s empirical orientation further strengthens its arguments. Rather than relying solely on theoretical concerns, the authors anchor their critique in available insolvency data, resolution statistics, and practical experience under existing mechanisms. This evidence-based approach enhances the article’s analytical rigour and makes its conclusions more persuasive.

Perhaps the most significant contribution of the article is its broader policy message. The authors caution against viewing procedural innovation as a substitute for institutional reform. They argue that persistent delays, judicial capacity constraints, and market inefficiencies cannot be resolved merely by introducing new insolvency processes. Instead, they advocate strengthening existing mechanisms and improving implementation before embarking on another major legislative experiment.

In conclusion, “Creditor-Initiated Insolvency: Cure or Catastrophe?” is a well-researched, logically argued, and highly relevant contribution to contemporary insolvency discourse. While its conclusions are decidedly critical of CIIRP, the critique remains balanced and grounded in evidence. The article succeeds in stimulating debate on the future direction of India's insolvency regime and serves as essential reading for insolvency professionals, corporate lawyers, policymakers, and academics interested in the evolution of the IBC framework.

Overall Assessment: An insightful and persuasive analysis that challenges the assumption that regulatory innovation alone can cure systemic inefficiencies. The article makes a compelling case for prioritising institutional strengthening over the introduction of yet another insolvency experiment.