News and developments
Insolvency And Bankruptcy Code (Amendment) Act, 2026
INTRODUCTION
The Insolvency Bankruptcy Code (Amendment) Act, 2026[1] (hereinafter refereed as the “Act”) received the President’s assent on 6th April, 2026 and was subsequently notified by the legislative department of the Ministry of Law and Justice. It has been introduced to further amend the Insolvency and Bankruptcy Code (hereinafter referred to as the “Code”).
The Code received the President’s assent on 28th May 2016. It was introduced for reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of values of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration on the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India (“Board”), and for matters connected therewith or incidental thereto.
The provisions of the Code apply to the following in relation to their insolvency, liquidation, voluntary liquidation, or bankruptcy, as the case may be:
i. Companies incorporated under the Companies Act, 2013 or under any previous company law.
ii. Any other company governed by any special Act for the time being. However, it shall not apply to the company wherein the provisions of this Code are inconsistent with the provisions of such Special Act.
iii. Any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008.
iv. Such other body incorporated under any law for the time being in force.
v. Personal guarantors to corporate debtors
vi. Partnership firms and proprietorship firms
vii. Individuals, other than personas referred to in clause (v).
KEY HIGHLIGHTS OF THE ACT INTRODUCED
i. The Act has introduced definitions of “registered valuer” and “service provider” under Section 3 (27A) and (31A) of the Code respectively.
ii. Under the Section 3, an explanation has been inserted to clarify that the “security interest” exist only if it creates a right, title, or interest or a claim to a property pursuant to an agreement or arrangement, by the act of two or more parties, and shall not include a security interest created merely by operation of any law for the time being in force. The explanation makes it clear that a security interest exists only if it arises from an agreement or arrangement between two or more parties. It excludes interests created merely by operation of law, such as statutory charges or liens, unless backed by a consensual arrangement. This ensures that “security interest” is confined to contractual or negotiated rights, aligning with the Code’s purpose of protecting consensual creditors rather than elevating statutory claims.
iii. Under Section 5 of the Code, definition of “avoidance transaction” and “fraudulent or wrongful trading” has been introduced. Avoidance transactions typically involve transfers or dealings that unfairly strip value from the debtor’s estate before insolvency (e.g., preferential payments, undervalued sales). Fraudulent/wrongful trading refers to directors or managers continuing business when insolvency is inevitable, thereby worsening creditor losses. Earlier, it was difficult to hold parties accountable or initiate avoidance actions effectively. The amendment empowers resolution professionals and liquidators to act decisively.
iv. Pursuant to the amendment, the process for admission of applications under sections 7, 9 and 10 have been revised. Clause 4 substitutes Section 7(5) to mandate that the Adjudicating Authority shall pass orders within prescribed timelines, and shall record reasons in writing where such timelines are exceeded. Under the earlier framework, although the Code envisaged a time bound process, in practice the Adjudicating Authority often took months to admit or reject applications, leading to uncertainty, prolonged litigation, and erosion of asset value. There was also wide discretion in considering grounds beyond the statutory requirements, which created scope for inconsistent rulings. It further clarifies that upon satisfaction of the stipulated requirements, the application must either be admitted or rejected, and no extraneous grounds shall be considered. For this purpose, a record of default filed by a financial institution with an information utility shall be deemed sufficient to establish default. Clause 8 substitutes Section 12A to regulate the withdrawal of applications admitted under Sections 7, 9, or 10, and delineates circumstances under which withdrawal shall not be permissible. Clause 9 clarifies that the moratorium shall extend to proceedings initiated or continued by a surety against the corporate debtor under a contract of guarantee. Clause 10 modifies the procedure for appointment of the interim resolution professional.
v. Additionally, with respect to claims, cooperation, committee of creditors, avoidance actions, and transfer of guarantor assets. Clause 11 stipulates that the interim resolution professional shall verify claims submitted and, where necessary, determine their value. Under the original framework, the interim resolution professional’s role in verifying claims was not expressly mandated, which often led to disputes over the accuracy and valuation of creditor claims.
vi. Clause 12 expands the scope of the obligation to provide assistance, extending it beyond ‘personnel’ to encompass all categories of persons connected with the corporate debtor. In other words, Clause 12 expands the duty of cooperation beyond “personnel” to all persons connected with the corporate debtor because, in practice, critical information and assistance often lie with external advisors, affiliates, or connected parties who were not technically “personnel.” This expansion closes that loophole and guarantees that the resolution professional can access all necessary support to conduct the process effectively.
vii. Clause 13 provides that, in the event of liquidation, the Committee of Creditors (“CoC”) shall exercise supervisory authority over the liquidator and shall continue to function in certain ongoing liquidation proceedings. This was needed because once liquidation commenced under the earlier Code, creditor oversight diminished, leaving the liquidator with wide discretion and sometimes resulting in opacity or inefficiency. By giving the CoC supervisory authority, the amendment ensures creditor interests remain protected, enhances transparency, and maintains continuity of oversight even in liquidation.
viii. Further, Clause 15 mandates that the resolution professional shall file applications in respect of avoidance transactions, or instances of fraudulent or wrongful trading. Earlier, filing such applications was discretionary, leading to inconsistent enforcement. Further, ambiguity existed whether avoidance or fraudulent trading proceedings had to conclude before resolution or liquidation could proceed. Clause 16 clarifies that such applications shall not impede the conduct of the corporate insolvency resolution process or liquidation proceedings, and that the completion of those processes shall not preclude continuation of such applications. Clause 17 introduces a new Section 28A, enabling the transfer of assets of a personal or corporate guarantor in specified circumstances, subject to requisite approvals and the distribution framework prescribed therein.
ix. Clauses 18 to 20 have modified the rules relating to resolution plans and liquidation. Clause 18 introduces a new requirement mandating payment to financial creditors who do not vote in favour of the resolution plan, prescribes a minimum standard for such payment, and affirms that such distribution shall be deemed fair and equitable to those creditors. It further provides that the requirement shall not apply to certain cases already at an advanced stage, and obliges the committee of creditors to record reasons for its approval. Before the amendment of the Code, creditors who did not vote in favour of a resolution plan often received little or no payment, which raised fairness issues and led to litigation over whether such distribution was equitable.
x. Clause 19 amends Section 31 to permit staged approval, whereby implementation may be sanctioned first and distribution subsequently in specified cases. It also requires that notice be given to rectify defects prior to rejection, imposes a thirty day timeline for passing orders, safeguards licenses, permits and similar grants from suspension or termination during their subsisting period where obligations are duly met, and provides for extinguishment of prior claims against the corporate debtor and its assets upon approval of the resolution plan, subject to the explanations set forth therein. This amendment has been introduced because under the earlier Code, approval was treated as a single, all or nothing stage, which often led to delays if defects were found or if distribution arrangements were complex. The amendment has introduced streamline approvals, protect business viability, reduce delays, and ensure finality of claims, thereby reinforcing both creditor confidence and debtor rehabilitation.
xi. Clause 20 amends Section 33 to expand the framework governing liquidation orders, authorizes restoration of the corporate insolvency resolution process in certain circumstances prior to the passing of a liquidation order, stipulates that such restoration may occur only once, and prescribes timelines for the passing of liquidation orders. Before this amendment, once liquidation was ordered, there was no statutory mechanism to restore the corporate insolvency resolution process, even if circumstances changed or a viable resolution plan emerged late in the process. This often led to premature liquidation, loss of asset value, and reduced recovery for creditors.
xii. Clause 21 amends Section 34 to provide that, upon an order of liquidation, the Adjudicating Authority shall refer the matter to the Board for recommendation of insolvency professional to be appointed as liquidator. It further stipulates that the resolution professional engaged in the corporate insolvency resolution process shall neither be appointed nor replaced as liquidator for the same corporate debtor. This has been done because before the amendment, the resolution professional who managed the corporate insolvency resolution process could also be appointed as liquidator for the same corporate debtor, which raised concerns about conflict of interest and continuity of control. Further, the amendment has empowered the CoC to replace the liquidator by a vote of sixty six per (66%) cent, subject to prescribed conditions.
xiii. Under the Code, before amendment, once liquidation was ordered, the liquidator had wide discretion with limited statutory obligations to keep claims updated or pursue avoidance and wrongful trading actions. This often led to disputes, incomplete recovery, and reduced confidence among creditors. Clause 23 amends Section 35 to require the liquidator to maintain an updated list of claims, authorizes the liquidator to continue or institute proceedings in respect of avoidance transactions or fraudulent or wrongful trading, and provides that the committee of creditors shall supervise the liquidation process.
xiv. Clause 24 widens the scope of Section 36(3)(f) to encompass proceedings relating to avoidance transactions, fraudulent or wrongful trading, and matters under Section 47. Under the earlier Code, Section 36(3)(f) referred more narrowly to assets subject to certain proceedings, which left ambiguity about whether the liquidator could exercise control when such actions were pending or required. This gap often led to disputes over jurisdiction and hindered recovery efforts.
xv. Clause 25 omits Sections 38 to 42. Clauses 26 to 30 revise the look back provisions and related language in Sections 43, 46, 47, 49 and 50. The need for this change arose because the earlier drafting left interpretational gaps about the period within which such transactions could be challenged and the precise scope of creditor or liquidator action.
xvi. Clause 28 substitutes Section 47 to permit creditors, members, or partners to apply in cases where transactions or trading have occurred but were not reported by the liquidator or resolution professional and further provides for disciplinary action where such non reporting is established since the Code stated that the responsibility for reporting avoidance transactions or fraudulent and wrongful trading rested primarily with the resolution professional or liquidator, but there was no statutory recourse if they failed to discharge this duty.
xvii. Clauses 31 and 32 amend Sections 52 and 53 to regulate realization of security interests, provide for deemed relinquishment where intimation is not given within fourteen days, require agreement among secured creditors in specified cases, mandate deduction and transfer of certain costs and dues, clarify treatment of part secured debts, and prescribe distribution of government dues. Clause 33 amends Section 54 to require that an application for liquidation and dissolution be filed within one hundred and eighty days, subject to limited extension. It further provides that the committee of creditors shall decide upon pending avoidance or fraudulent transaction proceedings, or pending suits, prior to dissolution; authorizes dissolution upon such decision in certain cases; and mandates that the Adjudicating Authority shall pass dissolution orders within thirty day.
xviii. Clause 34 to Clause 38 amend Sections 54A, 54C, 54F, 54L and 54N, inter alia, by lowering certain approval thresholds from sixty six per cent to fifty one (51%) per cent and effecting related procedural modifications. Previously, the Code required a two thirds majority (66%) of the committee of creditors for certain key decisions in fast track or pre pack insolvency processes. This high threshold often made it difficult to secure approvals, especially in cases where creditor participation was fragmented or where a small minority could block progress.
xix. Clause 39 omits Chapter IV of Part II. Clause 40 inserts new Sections 58A to 58K, which collectively establish the framework for a creditor initiated insolvency resolution process. These provisions specify the categories of corporate debtors eligible for such process, identify the persons entitled to initiate it, prescribe the requisite approvals, and recognize the right of the corporate debtor to object. They further delineate the period for completion, the duties and powers of the resolution professional, and provide that the board of directors or partners shall continue to manage the affairs of the corporate debtor subject to the oversight of the resolution professional.
xx. The provisions also set out the moratorium rules, conditions for conversion into an ordinary corporate insolvency resolution process, circumstances permitting withdrawal of the public announcement, requirements for approval of resolution plans, and the application of other provisions of the Code to this Chapter with specified modifications.
xxi. Clause 49 omits Section 74, and Clause 50 omits Section 76. Section 74 addressed punishment for contravention of moratorium provisions, prescribing imprisonment or fine for officers of the corporate debtor who knowingly violated the moratorium. Section 76 dealt with punishment for fraudulent or malicious initiation of proceedings, imposing liability on persons who filed insolvency applications with dishonest intent. These provisions were considered duplicative or overlapping with other penal and enforcement mechanisms already strengthened in the Amendment Act (such as the new Section 164A on transactions defrauding creditors, and Section 183A on frivolous or vexatious proceedings). Their omission was intended to streamline the penal framework, avoid redundancy, and consolidate enforcement under more precise and updated provisions.
xxii. Clause 51 inserts a new sub section (4) in Section 96, providing that the moratorium under Section 96 shall not apply where an application is filed for initiation of an insolvency resolution process in respect of a personal guarantor to a corporate debtor.
xxiii. Clause 52 amends Section 99 by substituting the period of ‘ten days’ with ‘twenty one days’ in sub section (1), and by replacing the words ‘or the creditor’ with ‘and the creditor’ in sub section (10).
xxiv. Clause 53 amends Section 106 to stipulate that, where no repayment plan is submitted, the resolution professional shall report accordingly and the Adjudicating Authority shall terminate the insolvency resolution process, following which the debtor or the creditors may apply for bankruptcy. It further inserts a special provision governing meetings where the repayment plan relates to a personal guarantor to a corporate debtor.
xxv. Clauses 54 and 55 make consequential amendments to Sections 121 and 124. Section 121 deals with the procedure for filing bankruptcy applications. The amendment ensures consistency with the revised framework for insolvency resolution and liquidation, particularly where new timelines, duties of resolution professionals, and creditor rights have been introduced, whereas Section 124 relates to the discharge order in bankruptcy. The consequential amendment harmonizes this section with the new provisions on extinguishment of claims, treatment of guarantor assets, and avoidance proceedings, so that discharge orders do not conflict with ongoing or parallel processes.
xxvi. Clause 56 inserts a new Section 164A dealing with transactions defrauding creditors, empowering the Adjudicating Authority to restore the position as it existed prior to such transactions and to protect victims, subject to the safeguards prescribed therein.
xxvii. Clause 58 inserts a new Section 183A, authorizing the imposition of penalty in cases of frivolous or vexatious proceedings under this Part. It has been introduced to deter the misuse of the insolvency framework and to preserve the integrity of proceedings. Before the amendment, there was no specific statutory penalty for parties initiating frivolous or vexatious applications, which often led to unnecessary litigation, delay, and increased costs for stakeholder.
xxviii. Clause 72 amends Section 242 to insert a new sub section (1A), conferring upon the Central Government the power to remove difficulties arising in giving effect to the provisions of the Amendment Act, for a period not exceeding five years from its commencement. Earlier, the Central Government issued orders for resolving implementation issues but limited that power to a period of two years from the commencement of the Code.
xxix. Following Section 240A, new Sections 240B and 240C are inserted. Section 240B empowers the Central Government to establish an electronic portal for the conduct of insolvency and bankruptcy procedures under the Code. Section 240C authorizes the Central Government to prescribe the manner and conditions governing cross border insolvency proceedings, including recognition, relief, judicial cooperation, assistance, and coordination, with enabling power to adapt provisions of the Code or the Companies Act, 2013, as may be required.
CONCLUSION
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 introduces a wide ranging set of reforms designed to strengthen the efficiency, transparency, and fairness of insolvency and liquidation proceedings in India. By revising admission and withdrawal procedures, expanding the supervisory role of creditors, clarifying treatment of guarantor assets, and streamlining resolution and liquidation frameworks, the Act seeks to ensure time bound outcomes and equitable distribution among stakeholders. The amendments also modernize the Code by lowering approval thresholds, introducing creditor initiated resolution processes, empowering the Central Government to regulate group and cross border insolvencies, and enabling electronic platforms for procedural management. Provisions addressing fraudulent transactions, frivolous proceedings, and government dues further reinforce accountability and creditor protection. Taken together, these changes reflect a deliberate legislative effort to balance creditor rights with debtor protections, enhance institutional oversight, and align India’s insolvency regime with evolving global standards. The Act thus represents a significant step toward a more robust, predictable, and internationally harmonized insolvency framework.
Authors: Ms. Jyotsna Chaturvedi, Head – Corporate Practice and Navya Saxena, Associate