IBC (Amendment) Bill, 2025 – A Transformative Shift In India’s Insolvency Regime

IBC (Amendment) Bill, 2025¹ – A Transformative Shift In India’s Insolvency Regime

by Mrs. Shikha Goenka Ginodia (Partner, ANM Global) and Mr. Gaurav Suryavanshi (Principal Associate, ANM Global)

INTRODUCTION

The Insolvency and Bankruptcy Code, 2016 was a landmark reform in India’s corporate laws. It replaced several old legislations with one clear and efficient insolvency framework. The Code promoted three main goals: to save and revive companies that were still viable, to liquidate those companies that could not be rescued, and to maximise the value of assets in the process. By doing this, it aimed to create a fair and balanced system for resolving corporate distress. As a legislation, the Code promised for quick resolutions, but in practice it faced several procedural hurdles and lengthy court cases. Over time, court rulings also weakened the original creditor-first approach that the Code was built on.

Over 9 years of its being in force, several judicial precedents have led to the advancement of the legislative intent and has led to a paradigm shift, even at the very foundation of the Code. The 2025 Amendment now provides for usage of several judicial precedents and interpretations, thereby filling the legislative gaps of Code.

KEY AMENDMENTS UNDER THE BILL

1. Definition Enhancements
   • Security Interest: Security interest shall exist only if it creates a right, title or interest or a claim to a property pursuant to an agreement or arrangement, by the act of two or more parties, and shall not include a security interest created merely by operation of any law for the time being in force. As evident from the definition, the definition seeks to explicitly exclude statutory/government charges/claims, unless created by an agreement/instrument/arrangement;
   • Service Provider: The definition is newly defined to include IBBI-registered professionals, agencies, and information utilities, thereby expanding regulatory oversight to all ecosystem participants.
2. Procedural enhancements
   The amendment introduces procedural changes that intend to eliminate delay at every stage.
   • Timelines pertaining to Admission of CIRP (Section 7):
     Upon insertion of the word “must” in place of “may”, in section 7 of the Code, NCLT is mandated to admit CIRP applications within 14 days, on the basis of defaults record, all paperwork of the Application is complete and no disciplinary action is pending against the proposed insolvency professional. NCLT must now provide reasons for any delays. Further, in case the application is not complete, the Adjudicating Authority must give the applicant 7 days to rectify the defects. There is however no consequences for non-compliance.The explanations to Section 7 explicitly include that no other ground can be used to reject the Section 7 application. Further, a record of default from an Information Utility is a sufficient proof of default for admission purposes. This helps in curtailing the judicial delays by reducing discretion of Adjudicating authority in adjudicating admission.
   • Admission of CIRP under Section 9 as well: Similar to Section 7, if the Adjudicating Authority while hearing Section 9 application does not pass an order within 14 days of receiving the application, it must record the reasons for the delay in writing. In addition, operational creditors are now required to first submit their financial information to an Information Utility before filing an application under Section 9. This brings them in line with financial creditors, who already have the same requirement under the Code. The same obligation also exists in the IU Regulations.
   • Clarification of CIRP Initiation Date in Multiple Application Scenarios: Where multiple applications for initiating the CIRP, against the same corporate debtor are pending before the Adjudicating Authority, the initiation date shall be deemed to be the date of the filing of the first such application.
   • Withdrawal of CIRP: Withdrawal of CIRP is allowed only after CoC formation and subject to a massive 90% COC approval, reducing debtor abuse of withdrawal mechanisms. This move clearly shifts power back to financial creditors. This removes scope of withdrawal of CIRP by a settlement between applicant and CD before constitution of COC.
   • Removal of Fast Track CIRP– Chapter IV of Part II comprising of sections 55 to 58, which deal with fast track CIRP has been proposed to be completely omitted
   • Faster Liquidation: Section 54 is sought to be revised and the timeline is proposed to be further reduced. The completion of the entire liquidation process (for companies beyond repair) shall be within a time period of 180 days (with only a single 90-day extension window). The Application for extension to be made by the Liquidator must be supported by sufficient reasons.
   • Avoidance Transaction: To recover assets that were improperly transferred out of a company before its collapse, the code now allows for the reversal of “avoidance transactions” and declare the said transaction to be void. Look-back for Avoidance Transactions shall now start from the “initiation date” i.e., date of filing the application, instead of insolvency commencement date” (date of admission). It further empowers the creditors, members or partners to apply to the Adjudicating authority in case RP/Liquidator is not reporting. This helps in further vigilance.
   • One-time CIRP Revival: In the event, an attempt of CIRP fails, the CoC may request NCLT to restart CIRP and the NCLT may direct to restart the CIRP to be completed within such duration as it deems fit, but up to 120 days. The preference of such application to the NCLT has to be approved by not less than sixty-six per cent of the voting share of the COC, thereby improving chances for viable restructurings.
   • Resolution Plan Enforcement: NCLT, upon an application by the Resolution Professional, with a 66% voting share of the COC, first approve the implementation of the resolution plan and thereafter approve the manner of distribution provided therein, within a period of thirty days from the date of approval of implementation of such resolution plan.
3. Creditor Initiated Insolvency
   • The amendment introduces a new Chapter IV-A (Sections 58A to 58K) that creates a creditor-initiated insolvency resolution process. A financial creditor, belonging to a class of financial institutions as may be notified by the Central Government, may initiate the creditor-initiated insolvency resolution process for a corporate debtor by appointing a resolution professional as per the provisions of the Code.
   • Creditors (categorically “financial creditors” only) seeking to initiate the creditor-initiated insolvency resolution process shall, before appointing the resolution professional obtain the approval of the financial creditors of the corporate debtor belonging to the class of financial institutions, who represent not less than fifty-one per cent, in value of the debt due to such financial creditors.
   • The financial creditor must first give the corporate debtor 30 days to respond to the notice for initiation of such insolvency resolution process.
   • The debtor may approach the NCLT within this time period to contest the initiation by making a representation, on grounds such as absence of default or procedural irregularity, thereby preserving a right of defence. The Resolution Professional (RP) is chosen by the creditors themselves.
   • If there was a default but some procedural mistake occurred, the process will not be cancelled, instead, it will be converted into a regular CIRP. Unlike the usual system, a moratorium under Section 14 is not automatic here. Instead, under Section 58G, the RP has to apply to the Adjudicating Authority for a moratorium, but only after the CoC approves such an application
   • This is similar to out of court resolution, a practise used widely in foreign countries. It helps in reduces burden of Adjudicating authority and better control of creditors
4. COC to supervise liquidation of Corporate Debtor
   • While a liquidator has a statutory duty to all stakeholders in the waterfall mechanism, the Bill proposes to make provision for the committee of creditors constituted under the Code to also supervise the conduct of the liquidation process by the liquidator. This further enhances the checks and balances, and efficiency in liquidation.
5. Group & Cross-Border Insolvency: Modernising Frameworks
   • Group Insolvency
     A new Chapter VA is being added to let the Central Government frame rules for how insolvency and liquidation cases should be handled when they involve two or more companies that are part of the same group. Under the amendment bill, a “group” refers two or more companies that are linked by control or ownership. This includes a holding company, its subsidiary, or an associate company, as defined under the Companies Act, 2013. If insolvency is triggered against multiple related companies within the same business group, the Government will now have the power to make rules to deal with such cases together.Provisions such as joint resolution of corporate debtors that form part of a group companies, co-ordination between insolvency proceedings of the group companies, appointment of common insolvency professional are proposed to be implemented by the Central Government through the bill. This will help in value maximisation as well as co-ordination in large group defaults.
   • Cross-Border Insolvency
     The Bill empowers the government to establish a regulated framework for global insolvency coordination. The rules as prescribed may provide that any of the provisions of this Code or the Companies Act, 2013 shall apply with exceptions, modifications and adaptations, to administer and implement the provisions for cross-border insolvency, including designating benches and adapting domestic legislation for cross-border applicability.This has been a long pending demand of industry and will boost foreign investor confidence in Indian insolvency ecosystem.
6. Imposition of penalties for deterrence of vexatious litigation
   The Bill also introduces a penalty for filing frivolous or vexatious proceedings before the adjudicating authority (NCLT for corporate debtors and the Debt Recovery Tribunal for individual debtors).  This offence will be punishable with a penalty between which shall not be less than Rs. 1 lakh rupees and may extend to up to Rs. 2 crore rupees. The provision shall now act as a deterrence for abuse of court process by parties who seek to prefer frivolous proceedings under the Code for unjust reasons.
7. Electronic portal for insolvency procedures
   The Bill proposes that the Central Government will be empowered to mandate e portal. The electronic portal is intended to manage all stages of CIRP of a case, from filing to closure, within a secure, standardized, and accessible digital environment. This will further enhance the digitalisation and transparency of the CIRP status of a Company.

OBSERVATION

The Amendments proposed in the bill seek to reduce procedural abuse through controlled withdrawals, introduce innovative creditor-driven frameworks through CIIRP, and modernize India’s insolvency regime by addressing issues like group insolvency and cross-border coordination. They also accelerate liquidation, preserve asset value, and reinforce investor confidence through a robust clean-slate principle.

The Bill makes a major change by fixing a strict 14-day deadline for the NCLT to admit insolvency applications. Right now, NCLT benches are already overloaded, and many cases take months just to get admitted. Forcing a faster timeline would require adding more judges and support systems to ensure timely resolution.

The Bill proposes to give the Committee of Creditors (CoC), made up mostly of financial creditors, supervisory authority over the liquidator. A liquidator’s statutory duty is to protect the interests of all stakeholders in the liquidation waterfall (secured creditors, workmen, employees, government dues, operational creditors, and shareholders). If the CoC, dominated by financial creditors, oversees the liquidator, there is a risk that decisions may tilt in favour of financial creditors at the cost of others.

The bill has been referred to a committee for further examination to see its practical feasibility by taking into consideration the suggestions of various stakeholders.

 

Footnotes

[1] THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) BILL, 2025