Abstract

There is nothing in this world that is flawless, and everything has pros and cons of its own. This premise is applicable to all government-formulated legislation and policies, regardless of their type or character and the IBC is not an exception. The government implemented the Insolvency and Bankruptcy Code in 2016 with the intention of ending the non-performing assets (NPA) crisis in India and facilitating the free flow of credit across the economy. While the IBC has contributed to a measurable improvement in debt recovery and resolution efficiency, several structural and procedural challenges continue to limit its effectiveness. Despite giving the impression of being a strong and smart policy, the IBC ultimately fell victim to the system’s flaws. The paper also highlights the influence of industry-specific risks on NPAs, with the aviation sector serving as a critical case study. The ongoing insolvency proceedings of Go First Airlines (2023–24) underscore how volatile input costs (especially aviation turbine fuel), regulatory rigidity, and global contractual conflicts (e.g., with aircraft lessors under the Cape Town Convention) amplify financial distress and complicate resolution. This reveals the limitations of a uniform insolvency framework in addressing sectoral vulnerabilities.In this context, the paper argues for sector-sensitive insolvency protocols, institutional reforms, pre-default risk detection, and improved regulatory coordination to enhance the effectiveness of the IBC. Despite its shortcomings, the IBC has been a landmark reform that has shifted the balance of power towards creditors, reduced the culture of willful default, and improved India’s global rankings in ease of doing business and credit enforcement. Thus, with targeted refinements, the IBC holds strong potential not only to resolve existing NPAs but also to prevent their recurrence ushering in a new era of responsible borrowing and sustainable credit culture in India.

Keywords