The Insolvency and Bankruptcy Code, 2016 (“Code”) was enacted in 2016 to unify India’s fragmented insolvency framework to ensure a time-bound Corporate Insolvency Resolution Process (“CIRP”). The jurisprudence of the Code since its enactment has been continuously evolving through frequent landmark judgments and regulatory amendment to address the procedural bottlenecks and lacunas in the practical application of the Code.

The Lok Sabha on 12 August 2025 introduced the, Insolvency and Bankruptcy Code Amendment Bill, 2025 (“Bill”), which is the most comprehensive and substantial reform proposed since the enactment of the Code in 2016.

  1. KEY AMENDMENTS AND THEIR IMPLICATIONS
  2. Stricter Enforcement of Statutory Timelines and Removal for Judicial Discretion

The Bill casts an obligation upon the Adjudicating Authority to dispose of applications under section 7,9 and 10 of the Code within 14 days failing which reasons for delay are to be recorded in writing. The amended sections mandate admission once (a) the default is established, (b) the application is complete, and (c) no disciplinary proceedings are pending against the proposed Resolution Professional. The judicial discretion of the Adjudicating Authority recognized in “Vidarbha Industries Power Ltd. v. Axis Bank Ltd”[1] has also been neutralised and dispensed with.

  1. Appointment of Interim Resolution Professional (Section 10 of the Code)

In the case of voluntary application for insolvency under section 10 of the IBC, the Corporate Debtors right to proposes an Interim Resolution Professional (“IRP”) has been removed. The amendments enhances transparency and prevents the backdoor entry of erstwhile promoters or management. Upon admission of the Section 10, Application under the Code, the Adjudicating Authority will seek IBBI’s recommendation for an IRP.

  1. Restricted Withdrawal (Section 12A of the Code)

Stricter compliances for withdrawal of CIRP applications have been proposed, which would permit withdrawal only after CoC has been constituted, there is a 90% vote of the COC in favour of the withdrawal, and the withdrawal is permitted only up till the first call for resolution plans. Further the Adjudicating Authority would also be required to dispose of such applications within 30 days.

  1. Enhanced Supervisory Role of CoC (Section 21)

The CoC would be empowered to supervise the liquidation process conducted by the liquidator under Chapter III thereby strengthening creditor oversight.

  1. Transfer of assets of Guarantor of Corporate Debtor during process (Section 28A of the Code)

Proposes amendment to section 28A of the Code permits Creditors of the Corporate Debtor who have taken possession of guarantors to transfer/sell such assets, and proceeds will form part of the CIRP or liquidation estate. Where the guarantor is also under CIRP/Liquidation or personal insolvency, the COC of the Guarantor must also grant approval (except during liquidation where approval is not needed if the creditor has not relinquished the asset under Section 52.) The sale proceeds shall form part of the corporate insolvency resolution process or the liquidation estate of the Corporate Guarantor

  1. Mandatory Minimum Amount for Dissenting Creditors (Section 30)

Dissenting financial creditors shall receive an amount not less than the liquidation value or what they would receive under the plan if proceeds were distributed, whichever is lower, as determined under Section 53. This protects dissenting creditors while reinforcing the collective decision-making authority of the CoC, thereby reducing instances of strategic dissent and litigation over payout disputes.

  1. Opportunity to Rectify Defects: Two-Stage Approval of Resolution Plan (Section 31 of the Code)

The Bill, introduces a proviso to Section 31(1)(a), to establish a dual approval process for the resolution plan. The Adjudicating Authority will (a)first approve the resolution plan for implementation and management of the corporate debtor, enabling it to resume operations as a going concern and (b) lastly within 30 days, a second order will be passed approving the distribution of proceeds to creditors. By separating implementation from distribution, the amendment facilitates quicker revival of the corporate debtor, preserves business value and employment, and minimizes delays and disputes over creditor payouts thereby ensuring a more efficient and timely resolution process. Further, the bill proposes that Adjudicating Authority may before rejecting a Plan, give notice to the CoC to rectify such defects.

  1. Avoidance of Preferential and Fraudulent Transactions (Sections 43–49)

The look-back period for identifying preferential, undervalued, and extortionate transactions, has been revised to two years or one year from the date of filing, instead of from the date of admission, and to include the period during which a CIRP application is pending. The Bill further empowers creditors to initiate action where the Resolution Professional or Liquidator has failed to take action and the proceedings may continue even after the completion of CIRP, liquidation, or dissolution.

  1. Stricter Timelines

The Bill mandates stricter timelines with the requirement that the Adjudicating Authority record its reasons for delay in concluding the following:

  • Withdrawal of CIRP: within 30 days
  • Liquidation/Dissolution orders: within 30 days
  • Challenge to CIRP initiation: within 30 days
  • Withdrawal of liquidation: within 14 days
  1. Other Key Changes
  • Expanded definition of service provider to include all IBBI-regulated entities.
    • Extended moratorium under Section 14 to the liquidation stage.
    • Stricter penalties for frivolous litigation.
    • Government dues clarified as unsecured under Section 53.
    • Liquidation to be completed within 180 days, extendable by 90; voluntary liquidation capped at one year.
    • Interim Moratorium under Sections 96 & 124 not applicable for personal guarantors during resolution and bankruptcy.
  1. New Concepts Introduced
  2. Creditor-Initiated Insolvency Resolution Process (CIIRP) (Sections 58A–58K)

The Bill introduces CIIRP for specified corporate debtors and financial creditors. The process may be initiated jointly by notified financial creditors having a 51% voting consent, after notice to the corporate debtor for 30 days. If uncontested, CIIRP starts with a public announcement. The Board of Directors remains in control under the supervision of the IRP/RP. Moratorium may be sought if approved by 51% creditors. CIIRP shall be completed within 150 days, extendable by 45 days. Failure or non-cooperation may lead to conversion into regular CIRP.

  1. Group Insolvency Framework (Section 59A)

The Bill introduces the concept of coordinated resolution of multiple interconnected group companies belonging to the same corporate ‘group’ by allowing joint creditor committees, a common insolvency professional, and joint hearings before a single bench. This prevents duplication and maximizes recovery.

  1. Cross-Border Insolvency Framework

The Bill introduces a globally aligned cross-border framework that will provide for recognition of foreign insolvency proceedings, cooperation between Indian and foreign courts, and coordinated resolution of multinational group insolvencies, thereby enhancing investor confidence.

III. Concerns and Challenges

  1. Litigation Risks under CIIRP

CIIRP, despite its aim of avoiding delay, may result in litigation regarding default verification, creditor documentation, and oversight. In the absence of detailed rules, this can become highly contentious.

  1. Rigidity in Withdrawal Rules

Limiting withdrawal to post-CoC stage may discourage early settlements, undermining the Code’s objective of negotiated resolution where disputes can be resolved without formal proceedings.

  1. Uncertainty in Two-Stage Approval of Resolution Plant

The second stage of approval of Resolution Plant for distribution may lead to fresh rounds of litigation, regulatory delays, and prolonged recovery especially for operational creditors.

  1. Mandatory Admission of Sections 7 & 9 Applications May Incentivise Malicious Filings

Compulsory admission upon proof of default eliminates judicial discretion and, therefore, may motivate creditors to utilize insolvency for debt recovery purposes.

  1. Ambitious Timelines and Capacity Issues

The proposed timelines of 14 days for admission and 180 days for liquidation may not be feasible due to the prevalent backlog with the Adjudicating Authority and shortage of qualified insolvency professionals.

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 is a significant step toward a faster and more transparent, and globally aligned insolvency regime. By introducing CIIRP, group insolvency, and cross-border frameworks, it modernizes the Code and reinforces creditor empowerment. However, effective implementation will require detailed rules, institutional strengthening, and calibrated judicial oversight to prevent misuse and ensure that the reforms achieve their intended impact.

[1] 2022 SCC OnLine SC 841

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