In a bid to usher in sweeping reforms, Finance Minister Nirmala Sitharaman tabled the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (“Amendment Bill”) in the Lok Sabha on 12 August 2025. The proposed legislation represents a significant overhaul of India’s corporate insolvency framework, seeking to address critical challenges that have emerged under the Insolvency and Bankruptcy Code, 2016 (“IBC”).
The IBC, since its enactment in 2016, has served as India’s primary legislation for resolving corporate distress—designed to facilitate time-bound insolvency resolution, maximize the value of assets, and balance the interests of all stakeholders, including creditors, debtors, and employees. However, over time, the framework has encountered persistent issues, particularly prolonged delays in admission of cases, erosion of asset value during proceedings, and procedural gaps that have hindered effective implementation.
To remedy these shortcomings, the Amendment Bill introduces several transformative measures that provides for a framework for coordinated group insolvency and cross-border insolvency. The Bill also provides for a Creditor-initiated, out-of-court resolution mechanisms, Tighter statutory timelines and stricter curb on withdrawal. Collectively, these reforms aim to strengthen the efficiency, predictability, and global credibility of India’s insolvency ecosystem—reflecting the evolving needs of a complex and interconnected corporate landscape.
Faster Admission Time Frames
The Amendment Bill proposes for faster case admission before the National Company Law Tribunal (NCLT). The earlier provisions under the IBC required the Adjudicating Authority to decide the admission or denial of the Insolvency application before the NCLT with written reason within the stipulated 14 days time frame. However, under the New regime, it is proposed to make it obligatory and mandatory for the Adjudicating Authority to either admit or reject the Insolvency application within the mandatory 14 days decision period and shall provide written reason for any delay.
Clarification on Commencement Date
The new regime seeks to clarify and standardize the computation of the “insolvency commencement date”. In cases where multiple applications for initiating the Corporate Insolvency Resolution Process (CIRP) against the same corporate debtor are pending before the Adjudicating Authority, the amendment proposes to introduce the commencement date, deemed to be the date on which the first such application was filed.
This amendment attempts to remove procedural ambiguity and ensures uniformity in determining the commencement date, thereby mitigating delays that previously arose from disputes or uncertainty in calculating this critical timeline.
Withdrawal of Admitted Cases
The amendment reinforces the provision for the approval of 90% of the Committee of Creditors (CoC) at the time of withdrawal of insolvency cases. It further mandates stricter procedural checks so that withdrawals are allowed only in bona fide cases, such as genuine settlements, and not as a strategy to derail resolution after admission.
New Resolution Pathways
The existing provision under the IBC, mandates the NCLT through the Resolution Professional to take control of the assets of the corporate debtor in order to liquidate. The new amendment permits creditors to initiate and settle the insolvency process outside the NCLT by executing a pre-negotiated plan between the creditors and debtors for the approval of the NCLT.
Group Insolvency
The Amendment Bill proposes to introduces a new provision to enable the Central Government to make rules concerning the manner and conditions for conducting insolvency proceedings and liquidation proceedings where the proceedings are initiated against two or more corporate debtors forming a part of the group who are interconnected by way of control or significant ownership.
Cross-Border Insolvency
Under the existing Act, provision regarding cross-border insolvency remain dormant primarily due to the absence of notified rules and any bilateral agreements with foreign jurisdiction. However with the proposed Amendment, the reforms aim to introduce a cross-border insolvency framework alongside group insolvency and a creditor-led resolution process.
Personal Insolvency Provision
Under the current position, when a creditor filed an application under Section 95 of IBC against a personal guarantor, an interim moratorium automatically commenced from the date of filing. This means that no lawsuits, arbitration, or recovery action could continue or be initiated against the guarantor till the end of the moratorium period, however under the proposed amendment, this automatic protection to personal guarantors has been removed.
Governance of Resolution Plan
Under the existing IBC restructuring methods to merger, amalgamation, and demerger, have now been broadened to expressly include the sale of one of more assets of the corporate debtor.
Creditor Initiated Insolvency – Penalties and Safeguards
A new Chapter IV A has been inserted for a creditor initiated insolvency resolution process comprising of Sections 58A to 58K. Creditors holding at least 51% of financial debt may initiate insolvency, after giving a 30 days’ time to the Corporate Debtor for representation.
Reduced time-line for completion of the liquidation Process.
Under the existing law, the timeline for completion of the liquidation process has been reduced from 1 year to 9 months and the extension is possible only in exceptional cases to the extent only of 90 days.
Penalty for frivolous litigation
The Bill proposes to insert a penalty for initiating frivolous or vexatious proceedings before the Adjudicating Authority aimed at deterring persons from initiating such proceedings and delay the insolvency resolution and liquidation processes. Further application without sufficient documentary proof of default or coercive recovery shall be dismissed.
The 2025 amendment bill, in its current form, may ease some delays and encourage greater creditor participation. The government bodies are comprehensively reforming the IBC so as to bring its framework in line with global best practices.
By embracing reforms that emphasize revival over liquidation, fairness over dominance, and certainty over prolonged disputes, India can set a global benchmark in insolvency practice. Done right, this transformation will not just fix a system—it will build a foundation for resilience, growth, and enduring confidence in India’s economic future.
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