A law does not become unjust merely because it permits a large loss. Bankruptcy exists precisely because the whole debt cannot be recovered. Nor does an asset become a gift merely because its buyer pays substantially less than the failed company once owed. Debt is not value; an admitted claim is not a market price; and a haircut is not, by itself, evidence of corruption.
These distinctions matter. Without them, criticism of India’s insolvency regime becomes easy to refute.
But once every exaggeration has been removed, the facts that remain are troubling enough.
The immediate provocation is the personal-insolvency proceeding involving Subhash Chandra, founder of the Essel and Zee groups. The National Company Law Tribunal has cleared a repayment plan under which approximately $655,000 will be distributed to creditors against admitted claims of $2.31 billion, with another $26,000 assigned to process costs.
Measured mechanically, creditors recover roughly three paise for every $100 admitted: a haircut of about 99.97 per cent. The plan received support from creditors controlling 80.81 per cent of the voting share. Dissenting creditors, including LIC Housing Finance and HDFC Bank, questioned its viability and legality. The original bench divided, requiring referral to a third member. LIC Housing Finance, Canara Bank and Union Bank of India (UK) have since reportedly decided to challenge the approval; HDFC Bank has also been reported as considering an appeal.
The description of this as Chandra “settling a personal loan of $22,000 crore” is inaccurate. These were claims against him principally in his capacity as personal guarantor for debts incurred by Essel-linked companies. It has further been reported that only about $270 million related to guarantees furnished when the underlying loans were originally extended; many of the remaining guarantees were subsequently added as security.
Approval of Chandra’s personal repayment plan does not necessarily extinguish every creditor’s claim against the principal corporate borrowers.
That qualification changes the legal meaning of the transaction. It does not dissolve the public question.
A personal guarantee is supposed to mean something. If a promoter can give guarantees substantial enough to sustain thousands of crores of lending, remain associated with valuable businesses, residences and family-controlled corporate interests, and then emerge from personal insolvency by paying a microscopic fraction of the claims admitted against him, the system must explain—not merely pronounce—how the guarantor became so nearly assetless.
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Chandra’s currently disclosed net worth is approximately $3.33 million, of which $2.62 million is attributed to his residence. Dissenting creditors contrasted this with net-worth certificates supplied to lenders that placed his net worth at approximately $4.81 billion in 2017 and $4.25 billion in 2018. Those earlier certificates were based on provisional financial information and cannot by themselves prove present ownership, concealment or diversion. But the collapse they record makes the prior history of assets, transfers, encumbrances, family holdings and beneficial interests more—not less—important. The decisive issue is not whether $655,000 exhausts what is visible today. It is whether the system possessed, and used, the independent forensic capacity required to explain how so little remained visible.
That question acquires political weight because Chandra was not simply an unaffiliated businessman who happened to enter Parliament. He served in the Rajya Sabha from 2016 to 2022 as an independent elected with Bharatiya Janata Party support. His 2016 election followed the invalidation of a number of opposition votes; in 2022, he again contested as a BJP-backed independent. To describe him as a former BJP MP would be technically imprecise. To deny his documented political proximity to the BJP would be equally evasive.
Nothing in that proximity proves that the insolvency decision was politically directed. But democratic institutions are judged not only by whether influence can eventually be proved. They are judged by whether their procedures are strong enough to make the suspicion unreasonable. A politically connected guarantor paying three paise per $100 of admitted claims requires a standard of disclosure proportionate to the disbelief the result naturally produces.
The Chandra case is extreme, but the system that produced it is not marginal.
Our examination of the Insolvency and Bankruptcy Board of India’s case-level data found that, among 127 resolution cases with admitted claims above $1,000 crore concluded by June 2023, creditors had admitted claims of approximately $86.6 billion and realised about $28 billion. The aggregate recovery was 32.35 per cent; the corresponding haircut was 67.65 per cent.
By June 2026, IBBI reported 203 approved resolutions in this large-case category. Their admitted claims totalled $128.6 billion, while creditor realisation was $40.4 billion—31.35 per cent of claims. The arithmetical difference was approximately $8.42 lakh crore. Across all 1,484 approved resolution plans, admitted claims stood at roughly $149.6 billion and reported realisation at $45.6 billion.
It would be wrong to describe these differences—$8.42 lakh crore in the large cases or $9.92 lakh crore across the complete resolution universe—as money “handed over” to purchasers. Some admitted claims include accumulated interest and penalties. Many companies reached insolvency after their assets had deteriorated or disappeared. Resolution figures may exclude future equity appreciation, recoveries from guarantees and avoidance proceedings, and additional capital promised by purchasers. In several cases, liquidation would have produced still less.
IBBI therefore offers a different comparison. In the 203 large resolutions, creditor realisation was about 172.55 per cent of liquidation value. Across the complete resolution universe, creditors realised approximately 166.58 per cent of liquidation value and, in the 1,359 cases for which the estimate was available, about 94.72 per cent of fair value.
This is the strongest defence of the Code. It is also where the deeper problem begins.
When a company remains for years in financial and judicial limbo, its value decays. Workers depart, machines rust, contracts disappear, maintenance stops and suppliers withdraw credit. The diminished liquidation value then becomes the benchmark against which the eventual resolution is praised.
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Delay destroys value; the value after destruction validates a low bid; and the bid is declared successful because it exceeds the liquidation estimate produced after the enterprise has withered. The system can thus congratulate itself for rescuing half of what remained without accounting adequately for how the whole became a quarter.
The Parliamentary Standing Committee on Finance warned as early as 2021 about “disproportionately large and unsustainable haircuts,” tribunal vacancies, delayed admissions, post-deadline bids and the destruction of value through litigation. At the time, approximately 13,170 IBC matters involving about $94.4 billion were pending, and 71 per cent had already crossed 180 days. Subsequent parliamentary reviews have continued to identify shortages of benches, judicial and administrative vacancies, and litigation by promoters and unsuccessful bidders as sources of delay and value erosion. By June 2026, the 1,484 cases ending in approved resolution plans had taken an average of 633 days to conclude, even after periods formally excluded by adjudicating authorities were removed.
This state of affairs is often framed as a tragic departure from the Code’s original intellectual architecture. Raghuram Rajan’s foundational argument for bankruptcy reform was moral as much as financial: debt could no longer be treated as equity whenever repayment became inconvenient, and a credible insolvency regime would enforce accountability by establishing what he called “pure capitalism.” Arvind Subramanian’s diagnosis of the “twin balance-sheet” crisis supplied the macroeconomic urgency, while Viral Acharya warned that resolutions proceeding at a glacial pace, without systemic banking reform, would leave the underlying political economy intact.
But the conventional story—that a sound technocratic design was merely defeated by poor execution—is incomplete.
The Code placed enormous practical authority in a creditor-driven process. An applicant could propose the interim resolution professional, while the committee of creditors could retain or replace that professional. Registered valuers appointed within the process were to estimate fair and liquidation value. The creditors’ commercial judgment remained subject to scrutiny for statutory non-compliance and material procedural irregularity, but tribunals were not given a free-standing power to reject a plan merely because its haircut appeared extraordinary. In personal-guarantor insolvency, the resolution professional was not furnished with the broad investigative authority available to a bankruptcy trustee or, in defined respects, to professionals in corporate insolvency.
These were not minor drafting choices. They determined where institutional discretion would gather and where accountability would stop.
As the system scaled, creditor choice did not necessarily produce professional independence. Formal eligibility and disclosure rules could not by themselves eliminate repeat relationships among lenders, resolution professionals, valuers and legal advisers; nor has public data been adequate to reveal the concentration of appointments or recurring professional networks. Valuations may be performed by registered professionals, yet the public ordinarily sees neither the assumptions that produced them nor enough of the bidding record to judge how fully the market was tested.
Courts, meanwhile, have repeatedly held that they cannot substitute their own assessment of viability, valuation or distribution for the commercial wisdom of creditors. Their jurisdiction remains available where the Code has been violated or the process materially compromised. But an extraordinary haircut is not itself a statutory ground for intervention. The result is an accountability gap: precisely where an outcome most demands explanation, formal compliance may sharply limit the institution capable of demanding it.
The Chandra decision makes the gap unusually visible. The tribunal acknowledged that historical net-worth certificates furnished legitimate grounds for creditors to seek clarification. It nevertheless held that neither forensic auditing nor asset tracing was a mandatory precondition to approval and that the personal-insolvency provisions did not empower the resolution professional to conduct an unrestricted investigation into the guarantor’s financial history. That may be a defensible reading of the statute. It is also a devastating disclosure about the statute. A system can approve the near-total discharge of admitted personal-guarantee claims without first possessing an institution clearly charged with explaining an extraordinary depletion of declared net worth.
The problem, then, is not simply that safeguards written into the Code were later abandoned. It is that some essential safeguards were narrower than public rhetoric implied, others were never adequately resourced, and judicial doctrine reinforced the boundary between legal compliance and substantive economic explanation.
The rhetoric of “pure capitalism” did more than state an aspiration. It also presented the redistribution of industrial capital as if it were a neutral, market-clearing operation. The Code was described as a clean break from promoter capitalism: creditors would assert control, markets would discover value, inefficient ownership would give way to efficient ownership, and capital would return to productive use.
Yet price discovery under distress is never politically or institutionally weightless.
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A market containing few credible bidders, decaying assets, unequal information, exhausted creditors and repeatedly breached deadlines is not the market of an economics textbook. It is a distress bazaar. In such a bazaar, the capacity to acquire large and legally entangled assets at steep discounts belongs disproportionately to conglomerates possessing deep balance sheets, relatively inexpensive capital, specialised legal capacity and the institutional endurance to absorb prolonged litigation.
The Code did not simply fail to establish market discipline. It revealed how market discipline operates when market participants enter with radically unequal power.
This asymmetry becomes visible in several major corporate resolutions. In the Radius Estates case, admitted claims were reported at approximately $178 million, while the Adani Goodhomes plan provided about $8 million in payments to creditors. The plan also carried a material non-cash obligation: completion of the stalled housing project without additional payment from homebuyers. Published descriptions of the haircut have therefore varied according to the creditor category and plan components used as the denominator. Even with that qualification, cash recovery was exceptionally small relative to admitted claims. The NCLAT upheld the plan, rejecting challenges brought by dissenting creditors and applying the limited judicial review permitted over the commercial judgment of the committee of creditors.
In the resolution of Jaiprakash Associates, Adani’s approximately $1.5 billion plan was approved against admitted claims reported at roughly $5.7–5.9 billion Creditors selected it for its larger upfront component and shorter payment schedule even though Vedanta had reportedly offered a higher headline amount over a longer period.
These outcomes do not require a theory of conspiracy. That is precisely the point.
They can arise through individually lawful decisions inside a structure that privileges speed of realisation, certainty of payment and preservation of the operating enterprise. Courts defer, within statutory limits, to the commercial wisdom of creditors. Resolution professionals work inside circumscribed procedural mandates. Public lenders, under pressure to recognise recoveries and clean their balance sheets, may rationally prefer an immediate and dependable payment to a larger but more uncertain promise.
Each decision may be defensible on its own terms. Their cumulative economic effect may nevertheless favour the concentration of productive assets in the hands of the few enterprises able to purchase and sustain them.
The question, therefore, is not whether a particular resolution was legal. It is whether a sequence of legally coherent resolutions can produce a systemically troubling result.
That is how a panacea becomes carcinogenic.
The original disease was promoter capitalism without consequences: politically connected borrowers retained control while public banks renewed loans, restructured obligations and concealed losses. The new danger is more sophisticated. The old promoter may finally lose the company, but the public absorbs much of the lending failure, the asset deteriorates inside an overburdened process, and a stronger conglomerate acquires it at the end.
Accountability falls on the failed corporate shell, minority shareholders, employees and the balance sheets of public lenders. Whether it falls with equal force on the human networks of influence, related-party transfers, unexplained asset depletion and failures of credit appraisal is much less clear.
The cancer is not the haircut alone. It is opacity joined to concentration.
This does not mean that every large haircut is illegitimate, every successful bidder politically favoured or every public-sector lender negligent. It means that extraordinary public losses demand extraordinary institutional visibility. The burden of explanation must rise with the size of the haircut, the weakness of competition, the extent of delay and the political proximity of the parties.
If the Code is not to become an instrument of unexamined consolidation, India must subject resolution to a form of public accounting equal to the scale of public exposure. That means case-level disclosure of valuation assumptions, the number and quality of competing bids, the treatment of related parties and guarantees, and the reasons public financial institutions accepted exceptionally deep reductions. It means creating an independent forensic route where the disappearance of value cannot be explained by ordinary commercial failure. It means measuring outcomes not only against liquidation value at the end of deterioration but also against the value present when distress first became visible.
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Above all, it requires recognising that “commercial wisdom” cannot become a constitutional euphemism for unreviewable discretion. Courts need not price steel mills, ports or housing projects. But they can insist, within a clearly strengthened statutory mandate, that the process producing the price was competitive, informed, independent and free from avoidable delay. Deference to commercial judgment cannot require blindness to how that judgment was formed.
Several Members of Parliament had urged me, almost from the beginning of the NCLT era, to examine what they believed was becoming one of the largest transfers of public wealth into private hands in independent India. I took the description as political hyperbole.
The Code seemed, in principle, a necessary civilisational correction: a legal route out of arbitrary bank settlements, endless punishment, dead capital and promoter impunity. Arun Jaitley, a lawyer serving as finance minister, appeared to have supplied an institutional answer to a problem India had evaded for decades.
The evidence does not justify declaring every haircut a heist or every purchaser a beneficiary of state favour. It does justify a more unsettling conclusion.
India constructed an indispensable law without surrounding it with the transparency, adjudicatory capacity, forensic independence and political distance required by the power it concentrated. Some protections existed on paper but remained weak in practice; others were never written broadly enough to meet the expectations placed upon them. The Code did not simply suffer poor execution. Its institutional limits, combined with delay and unequal market power, created openings through which concentrated discretion could pass while retaining the appearance of neutral procedure.
Bankruptcy law was meant to ensure that failure carried consequences. After ten years, India must ask not only whether consequences have followed, but where they have landed: on those who created the failure, on those who financed it, on the public that ultimately absorbed it—or merely on the ownership of the asset, clearing the ground for the next concentration of power.