Insolvency and Bankruptcy Code (Amendment) Bill 2025: Will it Actually Fix Delays and Low Recovery under the Code?

[Deepika is a student at Institute of Law, Nirma University.]

The process of insolvency and bankruptcy begins when an individual or entity becomes incapable of repaying its outstanding debts. This financial condition is Insolvency, and when this goes into the legal process, it becomes bankruptcy. The objectives enumerated under the Insolvency and Bankruptcy Code 2016 (IBC), primarily focus on ensuring a time-bound resolution process, with the aim of maximizing the value of assets while balancing and protecting the interests of all stakeholders. However, the translation of the code into practice has encountered several challenges arising from procedural delays and a prolonged litigation framework. 

To attain the very objectives of the law, Finance Minister Nirmala Sitharaman introduced the IBC (Amendment) Bill 2025 (Bill), in the Lok Sabha on 12 August 2025. The Bill intends to provide a time-bound process to settle the Insolvency and Bankruptcy process, and with that, it also settles interpretational issues with the law. The Bill shifts the control from a single individual body. Now, the liquidator’s authority to admit and reject claims and to determine their value has been removed, with its role in supervising liquidation, appointing and replacing liquidators, and even restoring the corporate insolvency resolution process (CIRP) process in exceptional cases. What else the bill introduces is a creditor-initiated insolvency resolution process (CIIRP), which allows to directly initiate an insolvency process with stringent conditions. The Bill not only brings a lot of such changes to the table but also raises concerns regarding what has not been done. 

What are the Key Changes?

Admission of CIRP 

The Bill proposes that the Adjudicating Authority is mandatorily required to admit an application filed by a financial creditor upon satisfaction of three conditions: proof of default, absence of any disciplinary proceedings against the proposed resolution professional, and compliance with procedural requirements. The Authority has no discretion to reject such applications on grounds beyond those expressly provided. Further, the statutory fourteen-day timeline for admission is to be strictly adhered to, and any delay must be supported by written reasons from the authority. 

Withdrawal 

The Bill proposed the stringent conditions for withdrawal once the application has been accepted. Once an application is admitted, withdrawal is permitted only after the constitution of the committee of creditors (CoC) and requires the approval of 90% of the CoC. Further, withdrawal is not allowed after the issuance of the first invitation for resolution plans, and all withdrawal applications are required to be disposed of within a period of thirty days.

Two stage approval of resolution plan

The Bill proposes the concept of two-stage approval of the resolution plan. The first approval will be granted on an application filed by the Resolution Professional for the plan relating to the “handover and management of the corporate debtor’s business.” Thereafter, the Adjudicating Authority is required to separately approve the distribution to stakeholders within a period of 30 days.

Fixed liquidation timelines

The Bill proposes to extend the moratorium into the liquidation phase. It permits restoration of the CIRP from liquidation in exceptional circumstances, subject to a maximum period of 120 days. Liquidation proceedings are now subject to a strict time limit of 180 days, with only one permissible extension of up to 90 days. 

Expand look-back periods 

The Bill proposes to broaden the look-back window for examining avoidance transactions, including preferential, undervalued, and fraudulent transfers. Previously, this period was calculated from the date of admission of the insolvency application. The Bill can extend to the time prior to admission, beginning from the date the insolvency application is filed.

CIIRP

This Bill introduces a new framework that allows creditors to initiate insolvency proceedings for real business failures, which also includes an out-of-court mechanism. This requires to be backed by creditors with at least 51% of the outstanding debt and prescribes a time-bound process of one hundred and fifty days, extendable by a further 45 days.

Group insolvency framework

The Bill introduces a framework for the group insolvency having common ownership/management. This will allow the possibility of forming a common bench for the whole group and a shared resolution professional. The power to frame the rules related to the group insolvency has been delegated to the Central Government. 

Cross-border insolvency framework 

The Bill introduces a structured framework for cross-border insolvency based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law. It empowers the Government to frame rules, designate special benches, and make necessary legal adaptations. This will lay down a legal foundation for coordination between domestic and foreign insolvency proceedings. 

What Has Been Overlooked in the Bill?

Though the Bill addresses the delay procedure under the code, it even proposes the mandatory admission of the case if the three requirements: proof of default, absence of any disciplinary proceedings against the proposed Resolution Professional, and compliance with procedural requirements are fulfilled. With this, if the Adjudicating Authority fails to follow the timeline, they have to give the reason in writing. The delay in resolution does not happen mainly due to the delay in admission of the case, which is only a small part; the delay happens in completing the case.

The delays in IBC proceedings arise from inadequate capacity of the National Company Law Tribunal (NCLT), lack of members having specialized knowledge in commercial law, structural inefficiencies, and abuse of the process by repeated interlocutory applications. Without solving these ground problems, the proposed amendments are unlikely to yield any substantive impact. 

The Bill also fails to introduce a dedicated mechanism for the real estate sector, despite it accounting for the second-highest number of corporate insolvency cases under the IBC. 

The challenges faced by this sector are mainly due to a lack of funds, project delays, and legal complications arising from confusion over moratorium, creditor rights, and coordination caused by project-specific insolvency. The Investment Information and Credit Rating Agency highlights that there is a need for structural changes designed for the real estate sector. The agency also stressed that the capacity of the NCLT and National Company Law Appellant Tribunal must be increased for the amendment to work effectively.

Additionally, there is no accountability for the resolution applicant for implementing the plan. Section 31 of the IBC states that once a resolution plan is approved its binding on creditors, guarantors, government authorities, etc. However, it does not bind the resolution applicant to implement the plan. This highlights a serious gap in the IBC, as once the resolution applicant takes over the company, it should be their responsibility to implement the approved resolution plan. 

The Bill only allows for the cross border insolvency. It does not make full-fledged law over it; instead, it gives the power to the Central Government to make rules. This makes it problematic because there are no clear standards/principles that guide how the rules should be framed. It has been recommended that it must be based on the UNCITRAL Model Law, which is followed in about 60 countries. While framing rules, we must tailor them to address India’s problems instead of simply copying and pasting.

The proposed amendments also fail to address the issue of delay in the process due to a significant number of interlocutory applications before the NCLTs are initiated by promoters, ancillary disputes by third parties and raising claims even after resolution or liquidation by statutory and tax authorities. 

Furthermore, the Bill does not change the position of operational creditors who provide goods and services, leaving them with inadequate protection at the time of insolvency. It has also been noted that the IBC has been a dominant way for banks to recover dues; however, there are no strict laws to recover the “bad loans”, specifically for banks, as the current provisions suit only the corporates. Due to this, the banks have to settle for much less than the original amount.

Conclusion

The IBC’s very objective has been to resolve the insolvency in a time bound manner and maximize the assets of the corporate debtor. This amendment brings changes and addresses few of the problems so that it can achieve its very objective. 

The new amendment brings changes that are certainly going to be effective for the IBC. However, we must also not overlook the on-ground problems that might be created due to the changes in the code. The Bill misses out on too many things, which will nullify its efficiency. It only makes marginal adjustments but fails to confront the fundamental challenges. The missed opportunities show the dire need to do deep and evidence-based research while framing the amendment bills. 

The answer to the question will it actually resolve the problem depends on whether the authorities engage with the on-ground challenges effectively or not. By not engaging with these core concerns and sector-specific requirements, the proposed procedural changes risk increasing complexity without resolving the underlying problems.