Transforming India’s Insolvency and Bankruptcy Code: The Role of AI, Blockchain, and Digital Platforms
Adv. Navya Shekhar
– Justice Dr. D.Y. Chandrachud
Abstract
This article explores the potential of technology, specifically Artificial Intelligence (AI), Blockchain, and digital platforms, to enhance the efficiency and transparency of India’s Insolvency and Bankruptcy Code (IBC) processes. Despite the structured approach of the IBC, practical implementation often faces significant hurdles such as delays, information asymmetry, and cumbersome manual processes. The article highlights how AI can streamline IBC processes through predictive analytics, document review, and improved efficiency in creditor meetings and voting. Blockchain technology is discussed for its ability to provide secure and transparent tracking of assets and claims, as well as creating tamper-proof records of transactions and decisions. Digital platforms are emphasized for their role in fostering communication and process management among IBC stakeholders. The article also addresses challenges and considerations for technology adoption, including data privacy, regulatory ambiguities, and ethical concerns. Recommendations are provided for leveraging AI, Blockchain, and digital platforms responsibly and impactfully in the IBC ecosystem. The strategic integration of these technologies holds immense potential for making the IBC processes more efficient, transparent, and secure, contributing to a dynamic national economy.
Keywords
Insolvency and Bankruptcy Code (IBC), Artificial Intelligence (AI), Blockchain, Digital Platforms, Efficiency, Transparency, Data Privacy, Regulatory Framework, Ethical Concerns
Introduction
India’s Insolvency and Bankruptcy Code (IBC), 2016 stands as one of India’s most notable economic reforms. It was envisioned as a fundamental reset button which would replace a fragmented and sluggish system with a consolidated, time-bound framework focused on maintaining a healthy credit market and economic growth.
Despite its structured approach, the practical implementation often encounters significant hurdles. The first problem is delay in proceedings where stakeholders face long delays that often exceed statutory deadlines. We also have information asymmetry that complicates decision-making for creditors and resolution applicants. Then there are cumbersome manual processes for claim verification and data collation, and logistical challenges that stall progress.
These inefficiencies undermine the Code’s intended impact and carry substantial economic costs. This article attempts to highlight the pain points and introduce technology as a potential catalyst to overcome and streamline the entire framework of the Insolvency and Bankruptcy law.
Artificial Intelligence and machine learning algorithms can be used to analyze high volume complex financial data to provide insights which otherwise would have taken weeks and months of human effort. Blockchain ledgers, with their decentralized and immutable nature, can reliably ensure trust and security in claims management and elections, which can further be enhanced with automation. And finally, but just as significant, Unified Digital Platforms acting as central command centers for case management, communication, and data sharing. We already have a very successful example with UPI revolutioning and simplifying digital payment making transactions seamless, secure while also being accessible to remote corners of the country.[1]
These aren’t just incremental improvements; they represent a fundamental shift towards a faster, more reliable, and more transparent legal ecosystem. To stay ahead, we must embrace and adopt these tools early to make our legal infrastructure effective and efficient. In the subsequent sections, we shall discuss these in detail.
The AI Revolution: Streamlining IBC Processes through Artificial Intelligence:
Artificial Intelligence (AI) brings with itself a transformative opportunity to enhance the efficiency and transparency of the Insolvency and Bankruptcy Code (IBC) processes in India. We can leverage its ability to analyze vast datasets and provide insightful predictions to address many of the challenges that we face within the legal system.
- Predicting Potential Defaults and Identifying Early Warning Signs: AI can be used for the analysis of various forms of financial data, including balance sheets, bank records, market trends, and macroeconomic indicators, AI algorithms can help us identify patterns and abnormalities that may point to an increased risk of insolvency and predict scenarios of bankruptcy, loan defaults and potential fraud.[2]
- Automating the Review and Analysis of Large Volumes of Documents Involved in Insolvency Cases: Our current insolvency process naturally generates a large amount of documentation which can include nominal paperwork to financial records and contracts. AI with the help of ‘Natural Language Processing’ can parse through and extract relevant information while also flagging potential risks within the legal documents.[3]
- Improving the Efficiency of Creditor Meetings and Voting Processes: AI has already demonstrated its ability as an assistant with the advent of smart assistants. We can leverage AI to improve efficiency of meetings and voting processes as required under the IBC. AI tools can assist in organization, scheduling, agenda setting and capturing the meeting minutes. We can also use AI for automation of administrative tasks related to voting which would include result tabulation and creation of voting reports.[4]
Blockchain for Enhanced Trust: Augmenting Transparency, Security, and Efficiency in IBC:
Blockchain is a new emerging technology which offers a solution for enhancing trust, transparency, security, and efficiency within the framework of the IBC. Financial institutions across the world have started to leverage blockchain owing to its decentralized, immutable, and transparent nature. Here we will discuss how blockchain can support the nuances of IBC law.
- Secure and Transparent Tracking of Assets and Claims: One of the most important features of blockchain is to provide a secure and transparent ledger. It can be used for detailed tracking of financial data like the assets and claims of various debtors and creditors. Blockchain is inherently immutable, which in simple terms mean that once some information about assets and claims is recorded on the ledger, it cannot be altered or tampered with easily. This guarantees data integrity.
Blockchain has a distributed framework which allows all authorized participants to have a transparent view of the asset and claim status. This helps in fostering trust among stakeholders. It can also facilitate real-time tracking of asset transfer and real-time status of claim verifications which in turn can reduce delays caused by the legal bureaucracy.[5]
- Creating a Tamper-Proof Record of All Transactions and Decisions Made During the Insolvency Process: Blockchain can also be used to create a tamper-proof record of all transactions and decisions that are made throughout the CIRP and liquidation processes. These would include recording key decisions made by the CoC, the payments that are made to creditors, and other such significant events that take place during the insolvency proceedings.
The immutability of blockchain ensures that these records cannot be retrospectively altered. This enhances transparency and accountability among all stakeholders involved in the IBC process. Smart contracts can also be employed to automate certain procedural aspects of the insolvency process, ensuring compliance with the IBC regulations and reducing the scope for human error or manipulation.[6]
Digital Platforms: Fostering Communication and Process Management among IBC Stakeholders:
Digital platforms and online portals nowadays play a critical role in facilitating communication, information sharing, and process management in IBC cases.
We already have digital platforms in use or under development targeted streamline IBC processes. Among them, we have the official website of the Insolvency and Bankruptcy Board of India (IBBI), which acts as a repository of information and resources. We also have the National Company Law Tribunal (NCLT), which utilizes an e-filing portal for parties to submit their applications online. The IBBI, in collaboration with the Indian Banks’ Association, has also launched the BAANKNET platform (formerly eBKray) as a centralized e-auction platform. This platform will be used for listing and selling assets under the IBC liquidation process.[7]
Overcoming Hurdles: Challenges and Considerations for Technology Adoption in the IBC Ecosystem:
Integrating these new technologies like AI, Blockchain, and digital platforms into India’s IBC processes offers major opportunities to boost efficiency. However, the adoption of these advanced technologies has its challenges.
One of the rising concerns with the use of AI is that of data privacy and security. The IBC process naturally involves the handling of highly sensitive financial and legal data. It is therefore essential to ensure that its adoption is tied with stringent data privacy regulations as mandated by India’s Digital Personal Data Protection Act, 2023. There must be appropriate measures in place to prevent any unauthorized access and mitigate any potential for misuse of personal and financial information.
We also have regulatory and legal ambiguities to deal with when integrating technology into the legal system. As of today, we do not have exact legal frameworks governing the use of these technologies. This can create uncertainties regarding the legal validity of AI-powered decisions. It can also in the long run impact the enforceability of smart contracts in insolvency proceedings, and the overall regulatory compliance within the IBC ecosystem.
There are some Ethical concerns and a potential for algorithmic bias based on the training data set its in AI-driven decision-making systems. AI systems can perpetuate or even amplify these biases. This would eventually lead to unfair or discriminatory outcomes in insolvency proceedings. To solve this problem and build trust in this system, we must ensure transparency in the AI algorithms themselves.[8]
Innoventive Industries Limited vs ICICI Bank (2017) ibclaw.in 02 SC [9]
Case Background: The case of Innoventive Industries Limited vs ICICI Bank is a landmark judgment that provides insights into the application and interpretation of the IBC in India. Innoventive Industries Limited, a company facing financial distress, was admitted into the Corporate Insolvency Resolution Process (CIRP) under the IBC. The case revolved around the definition of “default” under Section 3(12) of the IBC and whether a mere notice of demand for payment could trigger the CIRP.
Key Points:
- AI and Predictive Analytics: The Innoventive Industries case highlights the importance of early detection of financial distress. AI can be used to analyse financial data and predict potential defaults, which could have helped in identifying Innoventive Industries’ financial issues earlier.
- Blockchain for Transparency: The case underscores the need for transparent and secure tracking of financial transactions and claims. Blockchain technology could have been used to create an immutable record of transactions, ensuring that all stakeholders have a clear and tamper-proof view of the company’s financial status.
- Digital Platforms for Communication: The case involved multiple stakeholders, including the company, creditors, and regulatory bodies. Digital platforms could facilitate better communication and coordination among these stakeholders, streamlining the insolvency process.
- Judgment: The Supreme Court of India held that a demand notice could indeed be considered a “default” if it was a genuine demand for payment and not a mere reminder. This judgment clarified the scope of “default” under the IBC.
- Impact: The case set a precedent for how financial creditors could initiate insolvency proceedings against defaulting companies. It emphasized the importance of timely and efficient resolution processes under the IBC.
The Innoventive Industries case illustrates the practical challenges and legal interpretations involved in the IBC. The integration of AI, Blockchain, and digital platforms, as discussed in the article, could address some of these challenges by enhancing efficiency, transparency, and security in the insolvency and bankruptcy processes.
Conclusion
The integration of Artificial Intelligence (AI), Blockchain, and digital platforms into India’s Insolvency and Bankruptcy Code (IBC) processes presents a transformative opportunity to enhance efficiency, transparency, and security. The article highlights the potential of these technologies to address significant challenges in the current IBC framework, such as delays, information asymmetry, and cumbersome manual processes.
AI can streamline IBC processes through predictive analytics, document review, and improved efficiency in creditor meetings and voting. Blockchain technology offers secure and transparent tracking of assets and claims, creating tamper-proof records of transactions and decisions. Digital platforms facilitate communication and process management among IBC stakeholders, fostering a more cohesive and efficient ecosystem.
However, the adoption of these technologies is not without its challenges. Data privacy and security concerns, regulatory ambiguities, and ethical considerations must be carefully managed to ensure responsible and impactful implementation. The article provides several recommendations to address these challenges, including investment in research and development, clear ethical guidelines, standardization of data formats, comprehensive training programs, and the establishment of this regulatory framework.
The case of Innoventive Industries Limited vs ICICI Bank underscores the practical challenges and legal interpretations involved in the IBC. The integration of AI, Blockchain, and digital platforms could address some of these challenges by enhancing efficiency, transparency, and security in the insolvency and bankruptcy processes.
In conclusion, the strategic integration of AI, Blockchain, and digital platforms holds immense potential for making the IBC processes more efficient, transparent, and secure. By adopting a multi-faceted and strategic approach, policymakers, regulatory bodies, and stakeholders can leverage these technologies to create a more dynamic national economy. The path forward involves well-defined pilot projects, continuous monitoring, and regular evaluation to ensure the successful and responsible adoption of these technologies in the IBC ecosystem.
Recommendations and The Way Forward: Towards a Tech-Driven and Efficient IBC Framework:
We have established that use of technology has a great potential in the domain of IBC law. In order to harness this completely, we need a multi-faceted and a strategic approach. The below recommendations attempt to provide a reference for policymakers, regulatory bodies, and individuals regarding how AI, blockchain, and digital platforms could be used responsibly and impactfully in the IBC ecosystem.
Recommendations for Leveraging AI:
We need investment in research and development towards creating AI-powered tools specifically designed for IBC processes.
There is also a need for clear ethical guidelines and standards for the development and deployment of AI in IBC, addressing concerns such as fairness, transparency, and accountability. Standardizing data formats will increase the ability for different stakeholders to share data, leading to effective training and use of AI models.
We also need comprehensive training programs for insolvency professionals, judicial personnel, and all other involved individuals to enhance their understanding of AI and their ability to effectively utilize AI-powered tools in their work.
Recommendations for Leveraging Blockchain:
Blockchain systems could be developed or made available for the community that would allow concentration of this information to a point where future transactions occur independently of the previous payments made.
The interest of stakeholders in blockchain technology for national insolvency proceedings must be addressed through the establishment of a clear and comprehensive regulatory framework, legal clarity must be created in the data protection law context, as well as in the sense of desirable thresholds regarding the use of smart contracts.
Collaborations between technology providers, legal experts, and IBC stakeholders should encourage the creation of user-friendly, secure, and scalable blockchain platforms designed to address the nuanced requirements of the IBC ecosystem.
Recommendations for Leveraging Digital Platforms:
The ongoing development of technology for the insolvency ecosystem needs a directive push. Existing digital platforms, such as the IBBI website and the NCLT e-filing portal, should be continuously monitored and enhanced as per user feedback to ensure availability of a wider range of information available and further streamline IBC processes.
Use of secure and efficient e-voting platforms should be encouraged for creditor meetings. This will improve stakeholder participation and make the overall process more efficient. Additionally, we need to invest in digital literacy programs for all stakeholders, ensuring that everyone can effectively use the available digital platforms and technologies.
Addressing Challenges and Ensuring Responsible Adoption:
Data privacy and security should be a top priority as we integrate technology into a complex domain of legal systems. The data protection measure that aligns with the Digital Personal Data Protection Act, 2023, should be implemented across all platforms.
We must make sure to establish clear mechanisms for continuous monitoring and regular evaluation of the impact of technology adoption on IBC processes. It will be crucial for identifying areas for improvement and addressing any unintended consequences that may arise.
The Path Ahead:
A strategic and phased approach is crucial for integrating technology in any complex system. This should start with well-defined pilot projects to test effectiveness and address potential challenges. Then, successful implementations can be gradually scaled up across the IBC ecosystem.
Strategic integration of technological advancements holds immense potential with context to the legal systems in India and IBC law in particular. Doing so can make the system significantly more efficient, transparent, and secure. Such advancements contribute significantly not just to insolvency reforms, but also to fostering a more resilient, and dynamic national economy for the years ahead.
References:
[1] Abdul Shaikh et al., Blockchain-Enhanced Electoral Integrity: A Robust Model for Secure Digital Voting Systems in Oman, 14 F1000Research 223 (2025), https://doi.org/10.12688/f1000research.160087.2.
[2] Sakshi Pandey & Harshvardhan Singh Sikarwar, Placing the Artificial Intelligence on the Insolvency Spectrum: An Analysis, IBC Laws (July 21, 2022), https://ibclaw.in/placing-the-artificial-intelligence-on-the-insolvency-spectrum-an-analysis-by-sakshi-pandey-and-harshvardhan-singh-sikarwar/
[3] Karthik K. Menon, The Role of Artificial Intelligence in Insolvency Proceedings: Can Technology Speed Up Resolution?, Insolvency Law Forum (Feb. 25, 2025), https://www.insolvencylawforum.com/post/the-role-of-artificial-intelligence-in-insolvency-proceedings-can-technology-speed-up-resolution
[4] Right2Vote, eVoting for Committee of Creditors (CoC) under IBC, RIGHT2VOTE.IN, https://right2vote.in/what-we-do/evoting-for-irps/coc-evoting-under-ibc/
[5] Pihu Mishra & Dr. Amit Dhall, Investigating the Potential of Digital Technologies, AI, and Blockchain in Transforming Insolvency Procedures, 44(3) LIBRARY PROGRESS INT’L 1 (2024), https://doi.org/10.48165/bapas.2024.44.2.1.
[6] Insolvency and Bankruptcy Board of India, Handbook on Ethics for Insolvency Professionals (2024), https://ibbi.gov.in/uploads/publication/6b683482bf24ca7023aa99c8ef198bd8.pdf.
[7] Priyansh Verma, Integrated Tech Platform for Insolvency by 2025-End, Fin. Express (July 25, 2024, 12:45 IST), https://www.financialexpress.com/business/banking-finance-integrated-tech-platform-for-insolvency-by-2025-end-3564189/
[8] IBC J. Res. & Rev. Tech., Vol. VIII (July 2024), https://ibc.org.in/wp-content/uploads/pdf/Journal-on-Research-Review-in-Technology-Vol-VIII-July-2024.pdf.
[9] Summary of Innoventive Industries Ltd. v. ICICI Bank & Anr., Judgment of Supreme Court, IBC Law, (Jan. 31, 2018), https://ibclaw.in/summary-of-innoventive-industries-ltd-vs-icici-bank-anr-judgment-of-supreme-court/.