The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, was tabled on August 12, 2025, in the Lok Sabha by the union finance minister, Nirmala Sitharaman. The main objectives of the bill include addressing procedural delays, the lack of judicial certainty, and doubtful results of recovery. The bill is also aimed at presenting frameworks meant for proceedings of group insolvency and cross-border insolvency along with a different method of resolving insolvency for companies.
As of February 17, 2026, the bill has yet to become an act. The government plans to introduce a revised version of the bill in the second half of the Budget Session of Parliament. Having been introduced in the Lok Sabha, it had been referred to the Select Committee, which submitted its final report and recommendations on December 17, 2025.
Background
It was only after consulting stakeholders and analysing recommendations provided by the insolvency law committees and the discussion papers issued by the government over a period of three years that the bill was presented with the amendments. The bill attempts to address the issues that have come up owing to the implementation of the Insolvency and Bankruptcy Code (IBC), 2016. The issues are mainly related to gaps, asset value erosion, and delayed admission of cases along with the events of approved resolution plans not being enforced as well as addressing the newer concerns, including the framework for cross-border insolvency and several companies’ insolvency.
About the Insolvency and Bankruptcy Code, 2016
The Government of India implemented the Insolvency and Bankruptcy code in 2016. The code deals with the insolvency of individuals and companies by specifying an integrated, fixed-time process. It is aimed at reforming insolvent companies so that they continue to exist and run. However, if it is not feasible, the liquidation of such companies will be done in accordance with the provisions mentioned in the code. The code has been framed on the basis of the following principles:
- To ensure transparent and predictable process
- To optimise the value of assets
- To resolve insolvency on time and with efficiency
However, the provisions for personal insolvency are not yet executed.
Do You Know?
Insolvency means the state of a company or an individual in which they are not able to repay their debts.
Some Salient Features of the Bill
Some of the important features of the bill are as follows:
- According to the Insolvency and Bankruptcy Code, 2016, insolvency among individuals and companies must be resolved within the specific time period. However, there arose interpretational issues and procedural delays. These will be addressed by the bill.
- As per the bill, the liquidator will not have any power related to admitting/rejecting claims along with ascertaining their value. Besides, the Committee of Creditors (CoC) has been authorised for the appointment and removal of the liquidators along with monitoring the procedure of liquidation.
- Under the bill, a creditor-initiated insolvency resolution process (CIIRP) will be initiated. With this process, certain financial institutions may begin insolvency proceedings out-of-court. Besides, while the process is ongoing, the company is in charge of the debtor.
- As per the bill, the central government is authorised to lay down the rules concerned with cross-border insolvency proceedings and group insolvency.
- According to the bill, statutory dues have not been granted the status of secured creditors. The bill further asserts that timelines mentioned in the code are vital.
Key Issues and their Analyses
- Modification of Liquidation Proceedings: As per the code, the liquidator has been bestowed with quasi-judicial powers in relation to claims for carrying out liquidation proceedings. During these proceedings, after the assets are distributed, all the rights are vanished. At that time, the certainty of claims is ensured by this provision of the code.
However, as per the bill, these powers of the liquidator have been removed. Now, he/she must take action in accordance with the CoC, which has been authorised to monitor the proceedings for liquidation. Besides, the CoC will give recommendations for the appointment of the liquidator. If 66 per cent of the total members of the CoC agree to the replacement of the liquidator, it will be done so during the liquidation process. The bill further states that the consolidation, verification, admission or rejection of claims need not be done by the liquidator. Also, the value of admitted claims need not be determined by the liquidator.
- Expanding the Role of the CoC: Considering the objective of the code regarding insolvency resolution within the specified time period so that the value of the assets does not decline, the code states that first the CoC under CIRP (Corporate Insolvency Resolution Process) must oversee the resolution. In the absence of resolution within the fixed time limit, the company must be liquidated. In such a case, the NCLT (National Company Law Tribunal) hires the liquidator. It is to be noted that creditors are not allowed to appoint the liquidator, nor can they control his decisions.
The code defines two stages when the corporate debtor is controlled by two different entities. When the CIRP begins, its control is transferred from the management to the agent of the creditors (RP). But if the resolution plan is not approved by the CoC within the specific time limit, the liquidator gets the control of the debtor. There is an amendment in the bill at the second stage. The CoC has a greater role to play in the liquidation process in addition to appointing and removing the liquidator. It will also administer the liquidator.
- Implementation of CIIRP: According to the bill, insolvency resolution of companies will be done using another process called CIIRP. However, only certain financial creditors are allowed to implement this procedure.
In CIIRP, insolvency proceedings are commenced out of the court. A minimum 51 per cent of notified financial creditors need to give their consent in order to start this process. While CIIRP is going on, the debtor will be in charge of the management of the company, however, the resolution professional (RP) will oversee it. Further, CoC may decide to transform CIIRP into CIRP depending on the situation.
- Implementation of CIIRP by only Certain Financial Institutions: Only certain financial institutions that the central government may approve of can commence CIIRP. The right to commence CIIRP is limited only to financial institutions. This is done to ensure that only the creditors with in-depth knowledge of financial management and skills employ this process. However, it is not clarified why only certain financial institutions are preferred over others. This concern needs to be re-examined later with the issue of related notification.
- Commencement Triggered on Default: As per the code, proceedings for insolvency resolution may be commenced on default. It is also specified that as soon as the value erosion begins and default occurs, CIIRP may be commenced. (Default means not paying financial or operational debt after it is due.) However, this challenges one of the main purposes of the code, which is to attain the highest value for assets during insolvency proceedings. Recoveries are reduced once the value erosion starts.
- Limited Withdrawal Window: As per the bill, an insolvency application cannot be withdrawn after resolution plans have been issued and before the formation of the CoC. That is, such withdrawals can be done only after the CoC has been formed. Further, at least 90 per cent of the CoC must give their consent for these withdrawals. This limits the withdrawal window and, in turn, obstructs out-of-court settlements. Furthermore, this may lead to an increase in the costs for debtors and creditors along with weighing down the courts. This also challenges the objective of the code regarding maximising the value of assets.
In addition, the applicant is supposed to justify the withdrawal if it is attempted after the resolution plans have been issued by the RP.
- No Proper Framework for Cross-Border Insolvency: As per the bill, the central government is authorised to frame rules related to cross-border insolvency proceedings. The bill states that the manner and conditions in which cross-border insolvency proceedings would be carried out and administered may be specified by the central government. However, the bill does not specify any detailed set of guidelines for such proceedings. As a result, the potential for extreme allocation of power has been given to the government.
- Triggering of CIRP Prior to CIIRP: As per the bill, only a notified financial creditor may commence CIIRP and that too only if the debt owed to such creditor has been default upon. The bill further states that the creditor cannot commence CIIRP if CIRP is already in continuation. Prior to defaulting on the debt owed to such creditor(s), no other payments—including salaries, taxes, rent, etc.—may be done by the company. In this situation, CIRP may be commenced by the operational creditors, which may prevent the financial creditor from commencing CIIRP.
Conclusion
The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, shifts the IBC from a rigid recovery mechanism to a versatile, creditor-driven regime capable of handling modern corporate complexities. However, its success will depend on balancing this new administrative flexibility with the judicial capacity required to ensure market certainty.
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