The amended bankruptcy law has brought in a creditor-initiated insolvency resolution process (CIIRP) to help restructure distressed companies. The draft CIIRP norms are also out. These regulations will shape whether statutory certainty translates into transactional certainty for resolution applicants.
Recent changes in insolvency law
The insolvency and Bankruptcy Code (Amendment) Act, 2026, provides a new mechanism — the creditor-initiated insolvency resolution process (CIIRP) — that minimises disruptions to business and use of court time. It also streamlines several processes and clarifies rights such as secured interest and waterfall entitlements to bring in predictability of outcomes.
Following this, the Insolvency and Bankruptcy Board of India (IBBI) has issued several discussion papers and draft rules to operationalise the provisions in the Act.
Proposed CIIRP regulations
The amendment act allows lenders to resolve stress of a company without going to court to trigger an insolvency proceeding, while the existing management runs the business.
The proposed CIIRP Regulations add the operational details, prescribing the manner of obtaining and documenting creditor approval (at least 51% in value), the procedure for giving the company 30 days to respond, the mechanics of conversion into a regular insolvency proceeding if resolution fails, and the compliance reports the resolution professional (RP) must file with the National Company Law Tribunal (NCLT) and the IBBI.
The regulations also require a bank guarantee with any withdrawal application. The 150-day timeline and non-automatic moratorium are statutory. But the procedural scaffolding that makes them enforceable is regulatory.
Handling dissenting financial creditors
When a resolution plan is put to a vote, a creditor who votes against it cannot hold out for a larger payout. The Amendment Act caps the dissenter’s entitlement at the lower of what it would get if the firm were liquidated, or what it would receive if the plan amount were distributed per the liquidation priority.
It also recognises inter-creditor subordination agreements within the same class. IBBI’s paper says existing regulations suffice to operationalise this formula. Whether that will hold will depend on how subordination arrangements interact with the “lower of” calculation in practice, particularly where subordinated creditors dissent.
No incentive for RP to liquidate
The resolution professional (RP) can no longer continue as the person who liquidates a company if resolution fails. The Amendment Act bars the RP altogether, removing the incentive to let resolution fail in order to continue in a liquidation assignment.
The proposed regulations expand the RP’s power to verify and determine the value of creditor claims during the resolution process, and provide that these verified claims carry over into liquidation without fresh invitation. This avoids duplicative effort. But it gives the RP a quasi-adjudicatory role that sits in tension with what the Supreme Court held in the Swiss Ribbons case about claim collation being non-adjudicatory.
Tightening the withdrawal process
Once insolvency proceedings begin, going back is now harder. The bidder must now put money on the table before withdrawing. Section 12A has been rewritten, responding to the procedural gap exposed by GLAS Trust Company LLC v. Byju Raveendran, where the Supreme Court held that tribunals could not use inherent powers to bypass the statutory withdrawal framework. The regulations also add a safeguard.
A bank guarantee covering estimated insolvency costs must accompany the withdrawal application. If the applicant fails to deposit actual costs within three days of tribunal approval, the guarantee is invoked. The statute closed the judicial discretion problem. The cost-recovery gap, by contrast, required a regulatory fix.
Clean slate codification
A buyer who acquires a company through a resolution plan now has statutory protection against old claims surfacing after the deal. Government tax demands, even if technically “secured”, cannot override this. Section 31(6) extinguishes all pre-approval claims, including subrogation rights.
The Amendment clarifies that a security interest must arise from an agreement between parties, not by operation of law, settling the position the Supreme Court had unsettled in State Tax Officer v. Rainbow Papers. The proposed rules, however, clarify that guarantor liability survives the resolution plan, and the manner in which the monitoring committee (now mandatory) supervises implementation.
The regulation-making here is not mechanical. It will shape whether statutory certainty translates into transactional certainty for resolution applicants.
When do the draft regulations come into effect?
The comment period for the draft regulations closed on April 28. The IBBI is expected to notify the regulations soon to operationalise the provisions in the Amendment Act. Further, group insolvency and cross-border insolvency remain at the framework stage, with rules yet to be notified.