Insolvency and Bankruptcy Code (Amendment) Bill 2025, Key Features

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, has been recently passed by Parliament to strengthen India’s insolvency framework. The parent law, the Insolvency and Bankruptcy Code, was enacted in 2016 to create a time-bound mechanism to deal with companies that default on their loans by reviving them through resolution or liquidating them if resolution is not possible. However, nearly a decade of implementation has revealed persistent challenges such as delays, excessive litigation, and lack of clarity in certain provisions. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 seeks to address these issues while strengthening the overall insolvency ecosystem. Before this amendment, the IBC had already been amended six times to address the pressing issues of the time and incorporate the needs of the stakeholders.

Insolvency and Bankruptcy Code (Amendment) Bill, 2025 Need 

While the IBC has improved recovery rates and altered borrower behaviour, its performance has been uneven.

• Although the IBC was designed as a time-bound mechanism, in practice, many cases have exceeded the prescribed limit of 330 days, often taking more than 600 days for completion, leading to deterioration in asset value. 
• A large number of cases continue to end in liquidation rather than revival, indicating inefficiencies in the resolution process. 
• Additionally, recovery rates have remained modest, and the process has been burdened by heavy litigation before the National Company Law Tribunal (NCLT).

These challenges have highlighted the need for reforms that can reduce procedural delays, enhance clarity in legal interpretation, and provide alternative mechanisms for resolution. The 2025 Amendment Bill seeks to respond to these issues while aligning the Code more closely with global best practices.

Insolvency and Bankruptcy Code (Amendment) Bill, 2025 Key Features

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 introduces several landmark reforms aimed at speeding up insolvency resolution, enhancing creditor control, and aligning India’s insolvency framework with global best practices.

Strict Timelines for Faster Resolution

• The Bill mandates that the process of liquidating a company should be completed within 180 days. In exceptional cases, this period can be extended by an additional 90 days.
• Once a company defaults on its obligations and meets all legal conditions, the adjudicating authority (NCLT) must admit the insolvency application within 14 days.
• After a resolution plan is submitted, the adjudicating authority is required to approve or reject it within 30 days. This ensures that decisions on whether a company will continue or be liquidated happen quickly, maintaining business continuity. 
• If any party appeals the decision of the adjudicating authority, the National Company Law Appellate Tribunal (NCLAT) must dispose of the appeal within 3 months. This prevents prolonged litigation from delaying the resolution process.

Creditor-Initiated Insolvency Resolution Process (CIIRP)

The Bill allows certain financial creditors to start insolvency proceedings without going to court first, provided they have the approval of at least 51% of creditors. The company’s existing management can continue running the business, but creditors supervise their decisions. This approach aims to keep the business running smoothly and complete the resolution within 150 days.

Empowering the Committee of Creditors (CoC) in Liquidation

When no resolution plan works, the company goes into liquidation, meaning its assets (land, machinery, inventory, etc.) are sold off and the money is distributed to creditors (banks, lenders). Once liquidation began, the CoC (the group of lenders/banks) had no say in what happened next. A liquidator was appointed by the court (NCLT) and worked independently. If the liquidator was slow, inefficient, or not acting in creditors’ interest, creditors could do nothing about it. What Changes Now:

• Creditors choose the liquidator: Instead of the court just appointing someone, the CoC now recommends who should be the liquidator. They pick someone they trust.
• Creditors can fire the liquidator: If the liquidator is underperforming, 66% of the CoC can vote to replace them. This accountability didn’t exist before.
• Claims process simplified: Earlier, the liquidator had to individually verify, admit, or reject every creditor’s claim (how much money each creditor is owed). This was time-consuming and caused disputes. Now that burden is removed from the liquidator, making the process faster.

Group Insolvency Framework

When a large conglomerate collapses (like Videocon), multiple related companies go insolvent simultaneously, but each was handled as a separate case, causing delays and value loss. The Bill introduces coordinated insolvency proceedings for such corporate groups, allowing decisions to be taken jointly, reducing duplication, and preventing assets from being lost in fragmented litigation across different benches.

Cross-Border Insolvency

When an Indian company has assets or operations abroad (or a foreign company has assets in India), current law has no clear mechanism to coordinate with foreign courts or protect assets overseas. The Bill creates a legal framework for this ensuring Indian insolvency orders are recognised abroad and vice versa. This boosts investor confidence, especially for foreign lenders and multinational businesses.

Clarification on Government Dues (Statutory Dues)

There was long-standing confusion about whether government dues (taxes, levies, penalties owed to the state) rank as secured creditors which would give them priority over banks and other lenders. The Bill clearly states they do not have secured creditor status. This gives banks and financial creditors more certainty about their recovery position and removes a major litigation trigger.

Penalties to Prevent Misuse

The Bill introduces penalties ranging from ₹1 lakh to ₹2 crore for filing frivolous or vexatious applications, aimed at curbing misuse of the insolvency process and reducing unnecessary delays.

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Insolvency and Bankruptcy Code (Amendment) Bill, 2025 Significance 

The IBC (Amendment) Bill, 2025 is a significant step in strengthening India’s insolvency framework and improving corporate debt resolution.

• Faster and Efficient Resolution: By enforcing strict timelines for admission, resolution approval, and appeals, the Bill ensures that decisions are made quickly, reducing delays and maintaining business continuity.
• Enhanced Creditor Participation: Empowering the Committee of Creditors (CoC) in both resolution and liquidation ensures greater accountability and aligns decision-making with the interests of financial stakeholders, improving recovery outcomes.
• Business Continuity: The Creditor-Initiated Insolvency Resolution Process (CIIRP) and debtor-in-possession model allow companies to continue operations during resolution, reducing disruption and preserving value.
• Clarity and Predictability: By clarifying the status of government dues and introducing penalties for frivolous litigation, the Bill makes the insolvency process more predictable and less prone to misuse.
• Global Alignment: Provisions for group insolvency and cross-border insolvency bring India closer to international best practices, enhancing investor confidence and promoting foreign investment.
• Macro-Economic Impact: Faster resolutions and higher recovery rates help reduce non-performing assets, strengthen the banking sector, improve credit availability, and support overall economic growth.

Insolvency and Bankruptcy Code (Amendment) Bill, 2025 Key Issues 

Despite its comprehensive reforms, the IBC (Amendment) Bill, 2025 has some challenges and areas of concern that need attention:

• CIIRP Not Available to All Creditors: Only specified large financial creditors, like banks, can initiate CIIRP, leaving small suppliers, contractors, and employees to use the slower court-based CIRP.
• Simultaneous Processes Create Conflicts: If CIIRP and regular CIRP run at the same time, the Bill does not clarify which process takes precedence or who controls the company, creating potential legal confusion.
• Existing Management Remains in Control: Under CIIRP, the company’s current management continues operations, which may be risky in cases of fraud, willful default, or mismanagement.
• Strict Timelines May Be Ineffective: Tighter deadlines are unlikely to succeed unless systemic issues in NCLT, such as staff shortages and frequent adjournments, are addressed.
• Group and Cross-Border Insolvency Rules Are Pending: Provisions exist only on paper; actual rules for corporate groups or foreign assets are yet to be notified, offering no immediate practical benefit.
• Small Creditors and Suppliers Remain Disadvantaged: Operational creditors have limited influence in CIIRP, minimal say in CoC decisions, and low priority during liquidation, perpetuating long-standing inequities.
• Penalties May Discourage Genuine Claims: Large fines for “frivolous” applications could deter legitimate creditors with weak documentation from filing claims, undermining the purpose of the IBC.