Why in the News?

• The Parliament has passed amendments to the Insolvency and Bankruptcy Code (IBC) to address delays and improve resolution efficiency.

What’s in Today’s Article?

• IBC (Background, Issues, etc.)
• News Summary (IBC Amendments, Key Implications, Way Forward, etc.)

Insolvency and Bankruptcy Code

• The Insolvency and Bankruptcy Code (IBC), enacted in 2016, provides a time-bound framework to resolve the insolvency of companies, partnerships, and individuals.
• The objective is to either revive financially distressed firms through a resolution plan or liquidate them in an orderly manner if revival is not feasible.
• The process is overseen by the National Company Law Tribunal (NCLT), with the Insolvency and Bankruptcy Board of India (IBBI) acting as the regulator.
• The IBC marked a major shift from earlier fragmented laws by creating a creditor-driven process and enforcing strict timelines for resolution.

Issues in Implementation

• Despite its transformative intent, the IBC has faced several operational challenges over time.
• Delays in admission of cases have weakened the time-bound nature of the process.
• Backlog of cases in tribunals has increased resolution timelines beyond prescribed limits.
  Recovery rates for banks have remained modest in many cases.
• These challenges have reduced the effectiveness of the IBC and highlighted the need for further reforms.

News Summary

• The Insolvency and Bankruptcy Code (Amendment) Bill, 2026, has been passed to address structural gaps in the insolvency framework.
• The amendments aim to speed up the resolution process and introduce new mechanisms such as out-of-court resolution, group insolvency, and cross-border insolvency.
• One of the key changes relates to faster admission of insolvency applications. The NCLT is now required to admit applications once a default is established, without additional discretionary conditions.
• A major reform is the introduction of the Creditor-initiated Insolvency Resolution Process (CIIRP).
• This allows specified financial creditors to initiate insolvency proceedings outside the traditional court-driven process, provided at least 51% of creditors agree.
• The amendments also incorporate recommendations of the Select Committee, which suggested measures to reduce delays and improve oversight. These include stricter timelines for appellate decisions and enhanced powers for regulators.
• Another important reform is the introduction of group insolvency and cross-border insolvency frameworks. These aim to address complexities arising from interconnected companies and international operations.
• The amendments also seek to reduce conflicts of interest by preventing resolution professionals from acting as liquidators in the same case.
• Further, the law replaces certain criminal penalties with civil penalties for procedural violations, recognising that delays or non-compliance may not always involve malicious intent.

Key Implications

• The amendments are expected to significantly improve the efficiency of India’s insolvency framework.
• Faster admission of cases will reduce initial delays, which have been a major bottleneck.
• The introduction of out-of-court mechanisms will provide flexibility and reduce the burden on the tribunal.
• Group and cross-border insolvency provisions will align India’s framework with global best practices.
• The reforms are also likely to improve investor confidence by ensuring predictability and reducing litigation delays.

Performance of IBC So Far

• The IBC has achieved notable outcomes since its implementation.
• As of December 2025, 1,376 companies have been successfully resolved under the framework.
• Creditors have recovered approximately Rs. 4.11 lakh crore. Financial creditors have achieved recovery of over 34% of their claims.
• These figures indicate that while the IBC has improved recovery and credit discipline, there is still scope for enhancement.

Way Forward

• The recent amendments represent a step towards making the insolvency framework more efficient and responsive.
• However, sustained improvement will depend on strengthening institutional capacity, especially tribunals.
• Reducing litigation and ensuring strict adherence to timelines will be critical.
  Further clarity in cross-border insolvency rules will be necessary for effective implementation.
• A balanced approach that prioritises resolution over liquidation will help preserve enterprise value and support economic growth.