The Lok Sabha on Monday passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, marking a major overhaul of India’s insolvency resolution framework with an emphasis on faster processes, stronger creditor control, and alignment with global standards. The legislation was approved as reported by a select Committee after detailed scrutiny.
The Bill, originally introduced on August 12, 2025, seeks to amend the Insolvency and Bankruptcy Code, 2016, which established a unified and time-bound mechanism to resolve insolvency across companies, partnership firms, and individuals. Insolvency arises when an entity is unable to meet its debt obligations, and the Code has been a key pillar of India’s financial reform architecture since its enactment.
The amendments were brought in to address persistent delays and procedural bottlenecks that have emerged during the implementation of the law. Introducing the rationale behind the changes, Finance Minister Nirmala Sitharaman said the reforms are intended to enhance the Code’s effectiveness and responsiveness. “It has become necessary to amend certain provisions of the Code and to insert new provisions for effective implementation,” she said, adding that the goal is to minimise delays and maximise value for stakeholders.
Replying to the debate in the House, Sitharaman underlined that the Code was designed as a resolution mechanism rather than a recovery tool. “Insolvency and Bankruptcy Code is a framework for rescuing viable businesses and resolving financial stress while preserving enterprise value. It was never intended to be a debt-recovery tool,” she said. Highlighting its impact, she added that the Code has helped revive companies, improve valuations, and protect jobs.
The Bill proposes 12 key amendments, introducing structural and procedural changes. Among the most significant is the creditor-initiated insolvency resolution process (CIIRP), which offers an alternative to the existing corporate insolvency resolution process (CIRP). Under this provision, financial creditors holding at least 51% of the debt can initiate proceedings while allowing the debtor to continue managing the company under the supervision of a resolution professional. The debtor will have a minimum of 30 days to respond and retains the right to challenge proceedings before the National Company Law Tribunal. The tribunal may convert the process into a standard CIRP if conditions are not met.
The legislation also removes the fast-track insolvency process for startups and small firms but retains and refines mechanisms such as the pre-packaged insolvency resolution process for MSMEs. It introduces strict timelines, mandating that CIIRP be completed within 150 days, extendable by 45 days.
In a significant reform push, the Bill empowers the central government to frame rules for group insolvency, enabling coordinated resolution of financially stressed corporate groups. It also introduces long-awaited provisions for cross-border insolvency, allowing cases involving assets or creditors in multiple jurisdictions to be handled more effectively, thereby boosting investor confidence.
The amendments further strengthen the role of the Committee of Creditors (CoC), granting it oversight of liquidation processes and the authority to replace liquidators. Timelines for liquidation have been tightened, requiring the tribunal to issue liquidation orders within 30 days and complete the process within 180 days, extendable by 90 days. Voluntary liquidation must be concluded within one year.
To prevent misuse, the Bill introduces penalties ranging from Rs 1 lakh to Rs 2 crore for filing frivolous or vexatious applications before adjudicating bodies such as the NCLT and the Debt Recovery Tribunal. It also mandates the tribunal to admit cases where default is established and procedural requirements are fulfilled, while requiring written explanations for delays beyond 14 days.
The select Committee that examined the Bill recommended several safeguards, including addressing potential conflicts of interest involving resolution professionals and enhancing oversight by the Insolvency and Bankruptcy Board of India. It also called for clearer rules on cross-border insolvency, defined timelines for appeals before the National Company Law Appellate Tribunal, and lower voting thresholds to speed up resolution processes.
Additionally, the Committee suggested decriminalising certain technical offences under the Code and replacing them with civil penalties to reduce litigation and improve efficiency. It stressed the need for stronger governance standards and transparency in the functioning of the CoC and implementation of resolution plans.
Sitharaman noted that the amendments are the outcome of extensive consultations over three years, including stakeholder discussions and expert committee deliberations. “The Code, as an economic legislation, requires periodic updates to align with changing market needs and lessons learnt from practical experience,” she said.
The passage of the Bill is seen as part of the government’s broader effort to strengthen the financial ecosystem, improve credit flow, and enhance ease of doing business. By introducing creditor-led resolution, group insolvency, and cross-border frameworks, the amendments aim to make India’s insolvency regime more efficient, flexible, and suited to the complexities of modern business.
