A Last Chance at Revival: Analyzing Section 33(1A) IBC’s 'Second Life' CIRP Mechanism in Light of Global Insolvency Trends and Policy Challenges

[Animesh and Muskan are students at National Law Institute University Bhopal.]

The Insolvency and Bankruptcy Code 2016 (Code) was conceived to prioritize corporate rescue over liquidation, reflecting the principle that distressed companies should be revived wherever feasible. Under the original framework, however, when a corporate insolvency resolution process (CIRP) fails – either due to non-submission of a resolution plan within prescribed timelines or rejection of a submitted plan by the Adjudicating Authority under Section 31 – liquidation under Section 33(1) becomes virtually inevitable. The Code, in its pre-amended form, left no discretionary space to preserve the corporate debtor even if credible interest existed for revival. 

The consequences of this rigidity extend far beyond immediate financial loss, often eroding enterprise value, disrupting industrial operations, and resulting in large-scale job losses, as illustrated by cases like Amtek Auto Limited and ABG Shipyard Limited. To address these structural limitations, the Insolvency and Bankruptcy Code (Amendment) Bill 2025 proposes Sections 33(1A) and (1B), enabling a one-time, 120-day revival period upon application by the Resolution Professional with the consent of at least two-thirds of the committee of creditors (CoC). This mechanism ensures that liquidation occurs only when genuinely unavoidable, aligning the Code’s application with its original ethos of corporate rescue, as further emphasized in cases like Jet Airways and Bhushan Steel, and assessing how this amendment aims to turn procedural failure into an opportunity for structured revival while preserving the Code's focus on timely, value-maximizing resolutions.

Understanding Section 33(1A): The New "Second Life" CIRP Option

Section 33(1A) of the Code introduces a mechanism to avert premature liquidation, offering a carefully structured “second life” to the CIRP. Inspired by cases like Jet Airways, where viable resolution plans collapsed due to external challenges, it creates a final chance for revival before liquidation under Section 33(1). It balances creditor empowerment, judicial oversight, and efficiency, ensuring distressed businesses with genuine potential are not lost to rigid timelines or procedural setbacks.

Under Section 33(1A), the Resolution Professional may petition the National Company Law Tribunal (NCLT) to restore CIRP, but only with approval of 66% of the CoC. This high threshold ensures creditor consensus and screens out weak revival attempts. The second CIRP is capped at 120 days, reflecting the IBC’s time-bound philosophy while allowing new applicants or refinements of existing plans. Critically, the mechanism is a one-time recourse, preventing repetitive extensions that undermine efficiency or creditor confidence.

The provision applies when a plan fails—due to non-compliance with Section 31 or absence of any plan within the initial CIRP period—but before liquidation is ordered. In the second CIRP, the CoC evaluates plans under Section 30, with final approval by the NCLT under Section 31, ensuring rigorous scrutiny. Safeguards—the 66% threshold, 120-day cap, and single-use bar—prevent abuse while fostering urgency. If no viable plan emerges, liquidation follows, but Section 33(1A) converts failure into structured opportunity, preserving viable businesses and reinforcing the Code’s goal of maximizing value through resolution.

Comparative Analysis: India’s Reform in the Context of Global Insolvency Regimes

When placed against global insolvency regimes, Section 33(1A) reflects a middle ground between the debtor-friendly US Chapter 11 Bankruptcy Code and the creditor-supervised UK administration under the Enterprise Act 2002. Chapter 11’s “debtor-in-possession” model enables management-led turnarounds but often prolongs negotiations and opportunism, as seen in Enron and Lehman Brothers. By contrast, UK administration emphasizes creditor and judicial oversight, prioritizing rescue but quickly shifting to realization if revival seems unlikely. Section 33(1A) borrows this cautious emphasis on rescue but tempers it with safeguards absent in Chapter 11, ensuring revival is pursued only when economically viable.

The comparative experience underscores that revival is preferable to liquidation, but only where feasible. Chapter 11 shows how excess debtor latitude erodes value, while UK rigidity sometimes forces premature liquidations. Section 33(1A) synthesizes these lessons through a narrowly defined “second attempt” at revival—structured enough to avoid Chapter 11 sprawl yet more flexible than UK strictness. This reflects India’s recognition that liquidation carries financial and social costs, such as job losses and enterprise destruction, making it a last resort. The Supreme Court in Swiss Ribbons v. Union of India affirmed the Code’s rehabilitative purpose of value maximization through rescue, echoed in the Insolvency Law Committee’s 2020 Report advocating calibrated flexibility.

What sets Section 33(1A) apart is capped flexibility: a 120-day limit, single-use restriction, and supermajority creditor approval. These checks prevent endless renegotiation while avoiding premature creditor-driven liquidations. The cap signals insolvency is not an open-ended bargaining forum but a time-bound, value-maximizing process. In this balance, Section 33(1A) embodies a distinctly Indian pragmatism—aligned with global best practices yet tailored to domestic realities, as reinforced by Parliamentary Standing Committee reviews of IBC amendments.

Challenges in a Pragmatic Revival: Strengths, Risks, and Institutional Hurdles

Section 33(1A) represents a major policy shift in India’s insolvency regime, creating a structured opportunity for revival before liquidation becomes inevitable. Its key innovation is the “second life” CIRP—a one-time, 120-day window, triggered only by a 66% CoC vote, ensuring viable rescues are not lost to procedural lapses or early missteps. This aligns the IBC with global rescue-oriented standards and reflects judicial emphasis on value preservation and stakeholder interests.

Yet the provision’s complexity demands vigilance. Safeguards—the single-use cap, strict timelines, and creditor supermajority—seek to prevent delays and misuse, but require strong judicial screening to separate genuine recovery efforts from speculative tactics. The CoC’s fiduciary role is equally vital, ensuring decisions weigh financial recovery against systemic stability.

Institutional capacity and regulatory alignment remain challenges. Greater responsibilities for Resolution Professionals and asset experts may strain the system, while effective implementation hinges on courts and regulators balancing facilitation of revival with preventing abuse, so Section 33(1A)’s promise translates into real rescue and value creation.

Judicial & Practical Impacts: Lessons from JSW Steel and Other Landmark Cases

The practical significance of Section 33(1A) comes into sharper relief when viewed through landmark corporate insolvency cases. For example, in the JSW–Bhushan Steel Case – even after the CoC approved the resolution plan, extraneous factors such as pending investigative attachments stymied plan implementation, exposing the lacuna in the IBC’s capacity for last-mile revival. The Supreme Court in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, too, acknowledged the imperative that the process must end in genuine resolution rather than a mechanical descent into liquidation, emphasizing the importance of timely interventions and coordinated regulatory action.

Cases like Bhushan Steel and Jet Airways underline procedural ossification as a recurring threat – wherein even operationally or financially sound firms are consigned to liquidation due to technicalities, delayed submissions, or incomplete compliance with Section 31, closing off any window for further negotiation or restructuring. Section 33(1A) is crafted precisely to address such gaps, providing the Adjudicating Authority with a structured, exceptional tool to reconsider CIRP closure in cases where liquidation would be economically and socially wasteful.

From a judicial perspective, the NCLT and National Company Law Appellate Tribunal are likely to view this provision as an enabling measure rooted in the Code’s purpose, but with a cautious eye to procedural abuse. The expectation is that authorities will demand strict adherence to evidentiary and procedural requirements for revival petitions – insisting on bona fide demonstrations of new interest, credible financing, and substantial change in circumstances compared to the just-concluded CIRP. This approach aims to ensure the amendment does not devolve into a mere stalling tactic, but rather serves as a genuine safety net for distressed entities with recoverable potential.

Conclusion: Pragmatism and Vigilance in Life After CIRP

The 2025 amendment to Section 33 marks a significant and pragmatic shift in India’s insolvency regime by providing a structured "second life" for CIRP. It balances timely resolution with the opportunity to revive viable businesses, addressing previous rigidities that forced liquidation despite credible prospects for rescue. This mechanism, capped at 120 days with strict creditor approval, prevents procedural abuses while aligning with global best practices adapted to Indian realities. However, its success hinges on fiduciary responsibility of creditors, and effective institutional capacity to implement the provision faithfully. Bhushan Steel and other cases discussed above, reveal the necessity of such flexibility in preventing premature liquidation of economically sound firms. Overall, Section 33(1A) offers a cautiously optimistic path forward, inviting continuous engagement and critical evaluation to realize the Code’s original intent of maximizing value through corporate revival.