Why in News?

• The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 was introduced in the Lok Sabha by Finance Minister Nirmala Sitharaman to address persistent delays, maximise stakeholder value, and align the insolvency framework with international best practices.
• The IBC Amendment Bill 2025 seeks to overhaul admission procedures, introduce out-of-court resolutions, and implement group and cross-border insolvency mechanisms.

What’s in Today’s Article?

• Background - IBC’s Evolution and Challenges
• Key Provisions in the IBC Amendment Bill 2025
• Significance of the IBC Amendment Bill 2025
• Conclusion

Background - IBC’s Evolution and Challenges:

• The Insolvency and Bankruptcy Code (IBC): It was introduced in 2016 to provide a time-bound mechanism for rescuing and reorganising distressed companies.
• Achievements: It brought a culture of accountability, credit discipline among debtors.
• Challenges:
  • Procedural delays
  • Shortage of personnel
  • High backlog of cases
  • Steep haircuts for creditors
  • Deviations from original principles

Key Provisions in the IBC Amendment Bill 2025:

• Faster admission of insolvency cases:
  • Mandatory admission if default is proven, procedural compliance is met, and no disciplinary proceedings against the resolution professional.
  • Records from financial institutions deemed conclusive proof of default.
  • The 14-day timeline for the National Company Law Tribunal (NCLT) to decide on admission is to be strictly enforced; delays must be recorded in writing.
• Current scenario:
• The average time taken for admission is around 434
• In 2022, the Supreme Court had held that admission within 14 days was not a mandatory provision of the IBC.
• This means that the NCLT had discretionary powers on deciding whether or not to admit the insolvency application - the Bill seeks to remove this.
• Out-of-court resolution - Creditor-Initiated Insolvency Resolution Process (CIIRP):
  • Targets genuine business failures to reduce burden on NCLT.
  • 51% creditor consent needed to initiate CIIRP.
  • Corporate debtors retain management with oversight by resolution professionals (with veto powers).
  • Timeline: The CIIRP process would be required to be concluded within 150 days. In case of failure, the normal CIIRP process can be converted to standard corporate insolvency resolution process (CIRP).
• Group insolvency framework:
  • Coordinated resolution for companies in the same corporate group.
  • Aims to reduce value loss from fragmented proceedings.
  • Allows for common resolution professionals and joint committee of creditors (CoC) panels.
• Cross-border insolvency framework:
  • Facilitates recognition of Indian insolvency proceedings abroad.
  • Improves recovery of foreign assets and boosts investor confidence.
  • Aligns with the United Nations Commission on International Trade Law (UNCITRAL) Model Law and global best practices.
• Enhancements in liquidation process:
  • CoC empowered to supervise liquidation and replace liquidator with 66% vote.
  • The moratorium under CIRP extended to the liquidation stage.
  • Direct dissolution allowed for negligible assets.
  • Restoration of CIRP permitted once, on CoC request.
• Other notable provisions:
  • Expanded definition of resolution plan to include asset sales.
  • Restrictions on corporate applicant nominating resolution professionals.
  • Withdrawal of CIRP applications limited after key stages.
  • Avoidance transaction proceedings can continue post-resolution.
  • Removal of interim moratorium for personal guarantors.
  • Provision to prevent fraudulent transactions.
  • Clarification on priority of government dues.

Significance of the IBC Amendment Bill 2025:

• It addresses long-pending procedural bottlenecks.
• It promotes ease of doing business and investor confidence.
• It aligns India’s insolvency ecosystem with global standards.
• It encourages timely resolution and value maximisation for stakeholders.

Conclusion:

• If effectively implemented, the IBC Amendment Bill 2025 could transform India’s insolvency regime into a swift, transparent, and globally competitive framework, reducing delays and maximising asset value.
• By integrating out-of-court mechanisms, group and cross-border insolvency provisions, and stronger governance, it can position India as a trusted destination for investment and corporate restructuring in the coming decade.