Finance minister Nirmala Sitharaman on Tuesday introduced the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 in the Lok Sabha, by including provisions related to group insolvency, cross-border cases, and a creditor-led process to expedite resolution of bankrupt companies. The Bill was later referred to the select committee.
The much-awaited changes to the 2016-born Code, is expected to facilitate faster admission of bankruptcy cases and their speedier resolution. The additional provisions are also aimed at maximising asset value and improving governance, government sources said.
Key Reforms to Fast-Track the Insolvency Process
The creditor initiated insolvency resolution process (CIIRP) will provide an out-of-court initiation mechanism for genuine business failures to facilitate faster and more cost-effective insolvency resolution, with minimal business disruption. Once implemented, this will help ease the burden on judicial systems, promote ease of doing business and improve access to credit,” the sources added.
The latest set of amendments to the IBC, according to experts, will provide the economy a powerful shield in the wake of the geopolitical turmoil, besides infusing more life into the whole insolvency ecosystem.
As for the CIRP, the amendments would seek to expand the definition of resolution plans to include sale of assets. The priority of government dues will be clarified. The Bill also would restrict withdrawal of CIRP applications before the constitution of the committee of creditors and after the first invitation of the resolution plans. It would enable continuation of avoidance transaction proceedings post-CIRP. Additionally, there will be provisions to lay down a timeline for approval of resolution plans after its receipt by the Adjudicating Authority. This would provide an opportunity to the committee of creditors to rectify procedural defects and enforce the “clean slate” concept besides providing statutory recognition to the concept of monitoring committee for implementation of the resolution plan. Further, enhancement of recoveries from avoidance transactions, wrongful and fraudulent trading by extending the look back period and allowing creditors to also file for these transactions are included to maximize asset value.
A New Framework for Complex Corporate Structures
Significantly, the Bill seeks to mandate that insolvency applications are admitted within 14 days. Currently, an average of 434 days is being taken for admission of cases, leading to considerable value loss for the corporate debtors. The sources said Section 7 of IBC would be modified to specify that an application for initiating the corporate insolvency resolution process by the financial creditors shall be admitted if a default exists, and no other grounds shall be considered for deciding such an application. It is also clarified that when an application is made by a financial creditor who is a financial institution, the Adjudicating Authority shall consider records of default from information utilities as sufficient evidence to ascertain the existence of default. This change is designed to reduce time-lines for admitting applications related to financial debt.
According to the sources, the cross border insolvency mechanism proposed in the Bill would be an improvement over the current one that is limited to bilateral agreements, often resulting in delays and inefficiencies. A new section 240C would empower the Central government to prescribe rules for managing cross-border insolvency cases and to designate a dedicated Bench for handling such proceedings, thereby ensuring a more streamlined and predictable process.
A new chapter for “group insolvency” takes into consideration the fact that t many corporate debtors in the country operate within interconnected groups. They therefore face simultaneous financial distress, causing duplicated efforts, higher costs, and challenges in maximising value. Currently, the IBC addresses insolvency on an individual basis.
A new Chapter V-A will empower the Centre to frame rules for coordinated or consolidated insolvency proceedings for group companies to align with international best practices. These rules may enable a common bench, coordinated committees and professionals, a shared insolvency professional, inter-company coordination agreements enforceable by the Adjudicating Authority, and proper cost treatment, all aimed at reducing costs, avoiding duplication, and preserving group synergies for better value realization.
Another important feature of the Bill is a recasting of the liquidation process for speedier adjudication. The amendments seek to enhance efficiency and oversight in the liquidation process by empowering the committee of creditors to supervise liquidation, including a provision for replacing the liquidator by a 66% vote, and extending the moratorium available under the CIRP. The adjudicating authority will restore the CIRP once on the request of the committee of creditors, enabling potential rescue of viable companies. The committee of creditors can also recommend direct dissolution if assets are negligible, and can retain or appoint the resolution professional as liquidator.