The Insolvency and Bankruptcy Code, 2016 is not only a legal mechanism for resolving debt it is based on important economic and legal principles that explain the need for a structured insolvency system in a credit-based economy. Modern economies function largely on borrowed capital, businesses depend upon loans and investments to finance their operations, expand production and undertake new business initiatives. Therefore, credit plays an important role in the economic growth and development. However, the availability of credit also involves inherent risk of default and business failure, which cannot be completely avoided. In such a system, an effective insolvency framework is essential for dealing with financial distress in an orderly and structured manner. Without an organised legal framework, the failure of business may result in uncoordinated recovery actions by creditors, erosion of asset value, loss of employment and instability in the financial system. Insolvency laws aim to address these concerns by establishing a collective mechanism, through which the claims of the creditors can be resolved fairly and also providing an opportunity for viable businesses to be restructured and continue as a going concern. The Insolvency and Bankruptcy Code aim to balance these competing interests by ensuring timely resolution of financially distressed entities, maximisation of assets and ensuring fair treatment of stakeholders. The Code also recognises that insolvency is not only a legal issue but also an economic concern that requires a framework that promotes efficient allocation of resources and maintains confidence in the credit system. Through a structured and time bound manner the Code seeks to preserve the economic value, facilitate the recycling of capital from failing businesses to productive sectors, and support the overall stability of the financial markets.