As India prepares for the next generation of insolvency reforms — especially with discussions around the (IBC) Amendment Bill 2025— one question keeps resurfacing:
Should India shift from a “Creditor-In-Control” (CIC) model to a “Debtor-In-Possession” (DIP) model, similar to the US Chapter 11 system? This is more than a legal debate. It impacts revival outcomes, promoter accountability, investor confidence, and the overall speed of resolution.
Here’s a clear and practical comparative analysis for professionals, lenders, and policymakers.
India’s Current Framework: Creditor-in-Control (CIC)
Under the Insolvency and Bankruptcy Code (IBC), once CIRP begins:
- The Board of Directors is suspended
- Promoters lose control
- A Resolution Professional takes charge
- The CoC (creditors) control major decisions
This minimizes misuse, ensures transparency, and enforces creditor discipline in a country where promoter diversion was historically common. But it also comes with limitations:
- RPs may lack deep operational knowledge
- Transition delays can hurt business continuity
- Promoters with genuine intent get sidelined
- Buyers hesitate when the business deteriorates during CIRP
US Model: Debtor-in-Possession (DIP)
In the US Chapter 11 system:
- Existing management continues running the company
- Court supervision prevents misuse
- Creditors negotiate a restructuring plan
- Financing (DIP financing) helps keep the business operational
This model is collaborative and relies heavily on transparency, strong governance, and strict penal consequences for fraud.
Advantages include:
√ continuity of operations
√ better preservation of value
√ faster restructuring negotiations
√ existing management knowledge retained
But it also assumes:
→ promoters behave responsibly
→ books are reliable
→ courts and creditors have strong oversight mechanisms
India historically has challenges in these areas.
Comparative Snapshot: CIC vs DIP
| Feature | India (CIC) | US (DIP) |
| Who controls the business? | Creditors + RP | Debtor management |
| Risk of fraud/diversion | Low | Higher (unless governance strong) |
| Speed of revival | Moderate | Faster |
| Value preservation | Often weak due to operational disruption | Stronger |
| Lender confidence | High | Mixed |
| Promoter role | Minimal | Significant |
| Market maturity required | Medium | Very high |
Could DIP Work in India? Only Under Specific Conditions
Moving to a DIP model for all companies would be risky in India, but it might work selectively.
A DIP-style framework can work for:
- MSMEs with clean books and honest promoters
- Startups where IP/founder knowledge is critical
- Sectors where promoter involvement is essential for continuity
- Companies with early-stage insolvency, not deep distress
For larger corporates with complex fraud risks, CIC remains safer.
Possible Hybrid Approach for India
India does not need to copy the US system — it can adopt a hybrid model:
1. Debtor-in-Possession Only for CoC-Approved Promoters
Allow DIP only when creditors agree that management is reliable.
2. Strict Monitoring by RP (Supervisory Role)
RP supervises operations while promoters run day-to-day business.
3. Mandatory Digital Access & Real-Time Reporting
Centralised audited data room → eliminates manipulation.
4. DIP Financing Framework
India lacks a formal equivalent; it must be created.
5. Harsh Penalties for Misuse
Any diversion → immediate shift to CIC.
This hybrid can offer operational continuity without compromising lender protection.
Challenges India Must Solve Before DIP Can Work
- Weak governance in many companies
- Non-cooperation by promoters
- Incomplete financial records
- No DIP financing market
- Limited forensic and oversight capacity
- NCLT delays
Until these systemic issues are addressed, DIP cannot replace CIC entirely.
Conclusion: DIP Is Not a Replacement — But a Selective Upgrade
India’s Creditor-In-Control model has built discipline and accountability. Shifting fully to a Debtor-In-Possession model could be risky without stronger governance systems. But a selective, hybrid DIP framework could:
√ preserve business value
√ fast-track MSME revival
√ improve operational continuity
√ support promoter-driven restructurings
√ reduce liquidation rates
As the IBC evolves in 2025 and beyond, the future likely lies in mixing the strengths of both models — not choosing one over the other.
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Author Note: The author is an Insolvency Resolution Professional with extensive experience in managing multiple CIRP and liquidation assignments. For queries or professional discussions related to the Insolvency and Bankruptcy Code (IBC), you may reach out to: Krit Narayan Mishra at kritmassociates@gmail.com | +91 99108 59116.
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