The Insolvency and Bankruptcy Code (Amendment) Bill, 2025

1.Background and Context

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 represents the most significant overhaul of India's insolvency framework since the original Code was enacted in 2016. Introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha on 12 August 2025, this comprehensive reform aims to address procedural delays, reduce judicial discretion, enhance creditor rights, and introduce modern concepts like creditor-initiated resolution processes, group insolvency, and cross-border insolvency frameworks.

The Bill is the culmination of three years of stakeholder consultations and builds upon recommendations from multiple Insolvency Law Committees. It seeks to restore the Code's core principles of clarity, speed, and commercial certainty while adapting to the evolving needs of India's financial ecosystem.

The Insolvency and Bankruptcy Code, 2016 (IBC) was enacted to provide a time-bound process for resolving insolvency among companies and individuals. Since its implementation in December 2016, the Code has processed thousands of cases and has been instrumental in improving India's ease of doing business rankings. However, practical challenges have emerged over the years.

While the Code has achieved significant success, stakeholders have identified several areas requiring improvement, including procedural delays in admission of cases, erosion of asset value during prolonged proceedings, ambiguities arising from judicial interpretations, and inadequate frameworks for complex scenarios like group insolvency and cross-border insolvency.

What is the Insolvency and Bankruptcy Code?

The Insolvency and Bankruptcy Code (IBC) is a comprehensive law that consolidates all insolvency and bankruptcy proceedings in India. When a company defaults on its debt obligations, creditors can initiate a Corporate Insolvency Resolution Process (CIRP) to either revive the company through a resolution plan or liquidate it if revival is not possible. The entire process is overseen by the National Company Law Tribunal (NCLT), and a Committee of Creditors (CoC) comprising financial creditors makes key decisions regarding the company's fate.

2.What the Insolvency and Bankruptcy Code Amendment Bill 2025 Seeks to Achieve

The Amendment Bill has been designed with several critical objectives that address the practical challenges observed during the implementation of the original Code:

3.Major Amendments to the Corporate Insolvency Resolution Process (CIRP)

1. Strict timelines for admission of applications

One of the most significant changes is the introduction of mandatory timelines for the admission or rejection of insolvency applications. The Bill amends Sections 7, 9, and 10 of the Code to mandate that the NCLT must decide on applications within 14 days from the date of filing. If the NCLT fails to decide within 14 days, it must record reasons in writing for the delay. Applications with defects must be given 7 days for rectification.

2. Enhanced role of Information Utilities

The Bill clarifies that records of default from Information Utilities constitute sufficient proof of debt and default. This reduces the burden of proof on applicants and speeds up the admission process. Information Utilities are repositories of financial information that maintain authenticated records of debt and default, and the amendment strengthens their role in the insolvency ecosystem.

3. Appointment of the Interim Resolution Professional

Previously, companies filing for voluntary insolvency under Section 10 had to nominate an IRP. The Bill removes this requirement. Now, if no IRP is nominated or if the nominated person is ineligible, the NCLT will seek recommendations from the IBBI, which regulates insolvency professionals.

4. Restrictions on withdrawal of applications

The Bill tightens the provisions for withdrawing admitted insolvency applications. Currently, under certain regulations, applications could be withdrawn before the constitution of the Committee of Creditors. The proposed amendment requires that once an application is admitted, it can only be withdrawn with the approval of the Committee of Creditors, even if the CoC has not yet been constituted.

5. Expanded role of persons assisting the IRP

Section 19 has been amended to broaden the scope from only “personnel” (employees) to “persons,” which now includes:

• Current and former employees
• Management and associates
• Contractual service providers
• Promoters

All these persons are now mandated to extend assistance and cooperation to the IRP in managing the corporate debtor's affairs. This ensures that the IRP has access to all necessary information and support to conduct the insolvency process effectively.

4.Creditor-Initiated Insolvency Resolution Process (CIIRP)

One of the most innovative features of the Amendment Bill is the introduction of the Creditor-Initiated Insolvency Resolution Process (CIIRP), an alternative to the traditional CIRP that allows for out-of-court commencement of insolvency proceedings.

How CIIRP works

Key features of CIIRP

Potential concerns with CIIRP

While CIIRP introduces much-needed flexibility, some concerns have been raised:

• Priority for certain creditors: only specified financial institutions can initiate CIIRP, potentially creating a hierarchy among creditors.
• Risk of premature CIRP: other creditors might initiate traditional CIRP before CIIRP can be effective.
• Default as trigger: since default is still the trigger, it may not always serve the objective of maximizing value when early intervention could be more beneficial.
• Operational creditor exclusion: operational creditors (suppliers, vendors) are completely excluded from initiating CIIRP.

5.Revolutionary Changes to the Liquidation Process

1. Committee of Creditors' enhanced role

The Bill fundamentally changes the liquidation process by extending the role of the Committee of Creditors from CIRP into liquidation. Previously, once liquidation was ordered, the liquidator operated with significant independence. Now:

• Appointment authority: the liquidator is appointed on the proposal of the CoC.
• Removal powers: the CoC can replace the liquidator during the process with 66% member approval.
• Supervisory role: the CoC supervises the conduct of the entire liquidation process.
• Decision making: key decisions regarding asset sales and distributions require CoC approval.

2. Streamlined claims process

In a significant change, the Bill removes the liquidator's power to verify, admit, or reject claims and determine the value of admitted claims. This administrative burden is lifted, allowing the liquidator to focus on asset realization and distribution. The claims verification process will be handled differently, though detailed procedures are expected to be specified in regulations.

3. Reduced timeline for liquidation

Section 54 is revised to impose stricter timelines for completing the liquidation process, preventing indefinite proceedings and ensuring faster closure of insolvent entities.

6.Treatment of Security Interests and Guarantor Assets

Clarification on the security interest definition

The Bill clarifies the definition of “security interest” to distinguish between:

• Consensual securities: mortgages, pledges, hypothecation created by agreement.
• Non-consensual, statutory liens: claims by government authorities for statutory dues.

Transfer of guarantor assets

Section 28A is proposed to be amended to allow creditors who have taken possession of a guarantor's assets to transfer or sell those assets during the corporate debtor's CIRP or liquidation. The key provisions include:

• Sale requires approval from the corporate debtor's Committee of Creditors.
• If the guarantor is also undergoing insolvency proceedings, approval from the guarantor's CoC is also required (except during liquidation if the creditor has not relinquished the asset).
• Sale proceeds form part of the corporate debtor's resolution or liquidation estate.

This provision enables better asset realization by allowing secured creditors to monetize guarantor assets that are available to them, increasing the pool of funds available for distribution to all creditors.

7.Liquidation Waterfall and Priority Clarifications

The Bill adds illustrations to Section 53, which prescribes the order of priority for distributing liquidation proceeds. These illustrations clarify which contractual arrangements will be disregarded and which will be permitted.

Liquidation waterfall (order of priority)

8.Preferential, Undervalued, Fraudulent and Extortionate (PUFE) Transactions

The Bill makes important amendments to how transactions are examined for being preferential, undervalued, fraudulent, or extortionate. Section 43 is amended to change the look-back period for identifying PUFE transactions.

This change is significant because applications often take months to be admitted. By moving the reference date to the filing date rather than the admission date, the Bill ensures that the full intended look-back period is available for scrutiny of suspicious transactions. This prevents debtors from using the admission delay period to their advantage by conducting transactions that would otherwise be scrutinized.

9.Minimum Payment for Dissenting Creditors

Section 30 is amended to provide explicit protection for dissenting financial creditors (those who vote against a resolution plan). The amendment mandates that dissenting creditors must receive the lower of:

• the liquidation value (what they would receive if the company were liquidated), or
• what they would receive if the resolution plan proceeds were distributed according to the Section 53 waterfall.

This ensures that minority creditors cannot be forced to accept a resolution plan that gives them less than what they would receive in liquidation, providing an important safeguard against potential abuse by majority creditors.

10.Group Insolvency Framework

The Bill introduces enabling provisions for group insolvency, recognizing that modern corporate structures often involve multiple interconnected entities within the same corporate group. The framework allows for:

• Joint creditor committees: a single CoC can be constituted for multiple group companies undergoing insolvency.
• Common insolvency professional: one Resolution Professional can handle the insolvency proceedings of multiple group entities.
• Joint hearings: the NCLT can conduct joint hearings for related group companies before a single bench.
• Coordinated resolution: enables holistic resolution that considers the interdependencies between group entities.
• Consolidated plans: allows for resolution plans that address the entire group rather than individual entities in isolation.

The detailed rules and procedures for group insolvency will be framed by the central government. This framework is particularly important for addressing situations where value exists at the group level but individual entities may not be viable standalone businesses.

Benefits of group insolvency

• Value maximization: prevents value destruction from piecemeal liquidation of interconnected entities.
• Efficiency: reduces duplication of processes and costs across multiple proceedings.
• Holistic view: allows creditors and insolvency professionals to see the complete picture.
• Prevents strategic manipulation: reduces the ability of promoters to strategically structure group entities to defeat creditor claims.

11.Cross-Border Insolvency Provisions

The Bill empowers the central government to frame rules for cross-border insolvency, moving beyond the current bilateral arrangement provisions. New Sections 240B and 240C are proposed to be added.

Section 240B: Electronic portal

The government is empowered to establish an electronic portal to streamline procedures related to insolvency and bankruptcy processes, including cross-border matters. This digital infrastructure will facilitate information sharing, document filing, and coordination with foreign jurisdictions.

Section 240C: Cross-border insolvency framework

This section empowers the central government to:

• frame comprehensive rules for cross-border insolvency proceedings;
• designate special benches of the NCLT to handle cross-border cases;
• adapt other laws as necessary to accommodate cross-border insolvency;
• potentially align with the UNCITRAL Model Law on Cross-Border Insolvency.

12.Personal Insolvency and Bankruptcy Amendments

The Bill also makes significant changes to provisions relating to personal insolvency and bankruptcy (applicable to individuals and partnership firms).

No interim moratorium for personal guarantors

Sections 96 and 124 are amended to clarify that interim moratorium provisions do not apply to personal guarantors during resolution and bankruptcy proceedings. This means:

• Personal guarantors cannot escape liability by claiming moratorium protection.
• Creditors can proceed against personal guarantors even when the corporate debtor is undergoing CIRP.
• This prevents abuse where promoters who have given personal guarantees try to use insolvency proceedings to evade their guarantee obligations.

Simplified bankruptcy process

The amendments streamline the personal bankruptcy process, making it faster and clearer. If a debtor fails to file a repayment plan within the specified time, bankruptcy proceedings can be initiated directly, preventing indefinite delays.

13.Enhanced Powers of the IBBI

The Insolvency and Bankruptcy Board of India (IBBI), which regulates insolvency professionals and agencies, receives expanded powers under the Bill:

• Regulatory authority: enhanced ability to regulate service providers, including Insolvency Professional Agencies and Information Utilities.
• CoC oversight: power to monitor and regulate the conduct of Committee of Creditors members.
• Penalty powers: ability to impose penalties for non-compliance and misconduct.
• Suspension authority: power to suspend registrations of insolvency professionals pending investigations.

14.Mandatory Data Filing for Operational Creditors

The Bill introduces a requirement for operational creditors to file debt data with Information Utilities. Even if the corporate debtor does not authenticate this data, it will be deemed valid for the purpose of initiating insolvency proceedings. This:

• empowers operational creditors (suppliers, vendors, service providers), who often face difficulty proving debt;
• reduces the corporate debtor's ability to delay proceedings by refusing to authenticate debt records; and
• creates a more comprehensive database of corporate debt in the economy.

15.Impact on Different Stakeholders

16.Potential Challenges and Considerations

Even supporters of the reform acknowledge important implementation challenges:

17.Timeline and Current Status

Legislative journey

18.Comparison: Current IBC vs Proposed Amendments

19.Global Perspective and Best Practices

The amendments align India's insolvency framework with international best practices observed in mature economies.

Alignment with the UNCITRAL Model Law

The proposed cross-border insolvency provisions move India toward alignment with the UNCITRAL Model Law on Cross-Border Insolvency, which has been adopted by over 40 countries. This will facilitate international cooperation in insolvency matters and make India a more attractive destination for international business.

Debtor-in-possession models

CIIRP's debtor-in-possession approach is similar to Chapter 11 proceedings in the United States, where management continues to run the company while developing a reorganization plan. This model has proven effective for viable companies facing temporary financial distress.

Group insolvency frameworks

The group insolvency provisions draw from frameworks in jurisdictions like the UK, Singapore, and the EU, which have developed sophisticated mechanisms for handling enterprise groups in insolvency.

Creditor governance

The enhanced role of the Committee of Creditors, particularly in liquidation, reflects international practice where creditor committees play a central role in insolvency proceedings, balancing the powers of insolvency practitioners.

20.Frequently Asked Questions

21.Conclusion: What the Insolvency and Bankruptcy Code Amendment Bill 2025 Means for Indian Insolvency Law

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 represents a watershed moment in the evolution of India's insolvency regime. By addressing the practical challenges that have emerged over eight years of implementation, the Bill promises to make the insolvency process faster, more predictable, and more effective at achieving its core objective: maximizing value for all stakeholders.

For creditors, particularly financial institutions, the amendments offer stronger protections and greater control over the process. The enhanced role of the Committee of Creditors in liquidation, the clarification that statutory dues are unsecured, and the minimum payment guarantees for dissenting creditors all strengthen creditor rights. The CIIRP option provides a potentially faster and less adversarial path to resolution.

For corporate debtors, the amendments create both opportunities and constraints. The debtor-in-possession model in CIIRP allows management to remain in control while resolving financial distress. However, stricter timelines, expanded PUFE scrutiny, and tighter withdrawal provisions reduce the ability to use procedural delays strategically. Overall, the message is clear: genuine resolution is encouraged, but gaming the system will be harder.

For insolvency professionals, the amendments provide much-needed clarity but also impose greater accountability. The expanded IBBI powers mean higher professional standards will be expected and enforced. The introduction of group insolvency and CIIRP creates new areas of practice requiring specialized expertise.

For the broader economy, an efficient insolvency regime is crucial for credit availability, investor confidence, and business dynamism. By making outcomes more predictable and processes faster, these amendments should improve India's business climate and credit culture. When lenders have confidence they can recover dues efficiently through the insolvency system, they are more willing to lend. When businesses know financial distress can be resolved rather than leading to destruction, entrepreneurship is encouraged.

Looking ahead, the success of these ambitious reforms will depend on implementation. The government must move quickly to frame detailed rules for CIIRP, group insolvency, and cross-border insolvency. The NCLT system needs significant capacity building to meet the 14-day admission mandate. The IBBI must develop robust frameworks for regulating the new processes and maintaining professional standards. Stakeholders should prepare by understanding the new provisions, adapting internal processes, and training personnel; legal and financial professionals should deepen their expertise in the new areas the Bill introduces; and courts and tribunals will need to approach the new provisions with a mindset of commercial pragmatism rather than excessive formalism.

Most importantly, all stakeholders must embrace the spirit of the reforms, not just the letter. The amendments aim to create a resolution-oriented culture rather than a liquidation-oriented one, to promote cooperation rather than confrontation, and to achieve speed without sacrificing fairness. As India continues its journey toward becoming a $5 trillion economy, having a robust, efficient, and fair insolvency framework is not just desirable — it is essential, and this Amendment Bill represents a significant step toward that goal.