Background and Context

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.

As of June 2025, 8,492 Corporate Insolvency Resolution Process (CIRP) cases have been admitted under the Code. Of these, 1,905 cases remain ongoing, while the rest have been closed through resolution or liquidation. 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.

Key Objectives of the Amendment Bill

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

Major Amendments to 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.

Addressing the Vidarbha Industries Judgment

This amendment directly addresses the Supreme Court’s decision in Vidarbha Industries Power Ltd. v. Axis Bank Ltd., which had given the NCLT broad discretion to decide whether to admit an insolvency application. This discretion led to significant delays and inconsistent decisions. The new provisions eliminate this discretion, making admission almost automatic once the specified conditions are met.

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 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.

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

Revolutionary Changes to 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:

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.

Treatment of Security Interests and Guarantor Assets

Clarification on 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 hasn’t 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.

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:

What Contractual Arrangements Will Be Disregarded:

• Contracts between workmen and secured creditors that give secured creditors priority over workmen’s dues
• Any agreement that attempts to alter the statutory waterfall to the detriment of higher-priority claimants

What Contractual Arrangements Will Be Permitted:

• Contracts among creditors of the same class determining inter se priorities (for example, agreements between multiple secured creditors about their respective shares)

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.

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:

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.

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:

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 ability of promoters to strategically structure group entities to defeat creditor claims

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

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.

Enhanced Powers of IBBI

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

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
• Creates a more comprehensive database of corporate debt in the economy

Impact on Different Stakeholders

Potential Challenges and Considerations

Timeline and Current Status

Comparison: Current IBC vs. Proposed Amendments

Global Perspective and Best Practices

The amendments align India’s insolvency framework with international best practices observed in mature economies:

Alignment with 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.