The Insolvency and Bankruptcy Code (Amendment) Bill, 2025: Enhancing Efficiency in India’s Insolvency Framework

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, is an important legislative project, which aims to optimize the insolvency regime in India. The Bill aims to alter Insolvency and Bankruptcy Code, 2016 (IBC) that was instrumental in the settlement of stressed assets since its inception in 2016 under the Lok Sabha by the Minister of Corporate Affairs. The Bill is still under consideration at parliament, where it has been sent to a standing committee to be reviewed as part of the debates regarding its potential to resolve chronic bottlenecks in the insolvency procedure.

The major goals of the Bill include speeding up the case resolutions, reducing protracted processes, valuing assets as much as possible in an insolvency process, and provide solutions to handle complex situations like group and cross-border insolvencies. These targets highlight a larger goal of creating investor confidence, decreasing litigation, and standardizing India with the rest of the world, particularly the embodiments of the UNCITRAL Model Law. The Bill presents a solution to such issues as long admission periods and loss of assets, making it a reaction to the concerns of the stakeholders gathered in three years of operation and ensuring that the IBC becomes more resilient to the post-pandemic demands of an economy.

Key Changes: Provisions, Principles, and Shifts from the Existing Framework

Some of the specific amendments presented in the Bill include efficiency in the procedures, creditor empowerment, and increased scope of the insolvency processes. In its essence, it sharpens definitions and principles in order to eliminate ambiguities, which have been the source of conflicts in the past. An example is Clause 2 of the definition of security interest to include only consensual security interests, but not statutory security interest such as tax dues, the latter of which had traditionally granted revenue authorities a position of preference without the agreement of both parties. This is a step away the wider pre-2025 approach, where statutory claims may upset the rankings of creditors. Under Clause 2 and 3, new elements of the meaning of avoidance transaction and fraudulent or wrongful trading are introduced, and hence standard terminology is implemented across the Section 43, 45, 49, 50, 66, which were previously imprecise on their specific meanings, and had been inconsistently applied in judicial practice.

Clause 4, on initiation and admission, requires the Adjudicating Authority (AA) to admit applications to the financial creditor within fourteen days in case of default established through conclusive records of financial institutions hence removing any non-procedural grounds of rejection that was previously determined by the Resolution Professional (RP) eligibility criteria. Before this amendment, the vague criteria could be used to postpone admissions indefinitely, beyond the time frame of fourteen days set out. Both clauses 5 and 6 give the AA the mandate to inquire further with the operational creditors and corporate applicants but at the same time denies corporate debtors the right to nominate interim RP which was a significant change over the past system where nominations would lead to bias.

Clause 8 now has withdrawal conditions where ninety percent approval by Committee of Creditors (CoC) is required following admission, withdrawals prior to CoC formation or following invitation of first resolution plan are not allowed and there is a thirty-day disposal requirement. This is the opposite of the former flexible, less creditor-oriented approach. The moratorium extends through Clause 9 by prohibiting sureties to have a right to exercise a subrogation process against the debtor an express limitation that did not form the earlier described process. Clause 17 permits the guarantors to hand over assets to the Corporate Insolvency Resolution Process (CIRP) on CoC agreement creating a new mechanism that was not present in the initial Code.

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The innovations in the resolution plan approvals are in form of the two stages of Clause 19: an initial implementation approval with ensuing distribution within thirty days, which formalises the clean-slate principle containing pre-plan claims unless explicitly stated. Minimum payouts are given to dissenting creditors under Clause 18 on the basis of the lower methodology of liquidation value or Section 53 distribution, therefore, clarifying pre-existing ambiguous terms. The liquidation periods are shortened to one hundred and eighty days, including ninety days, under Clause 20, and the expedited CIRP is abolished. Creditor initiated insolvency (which must have at least a 51% per cent stake of financial debt holders) and group insolvency structures are the new Chapter IVA and VA respectively, and therefore they fill gaps in the 2016 Code, where there were no specific provisions to cover such situations. The amendments are supplemented by penalties against frivolous proceedings and greater rule-making authority in IBBI providing an indication of a determination to discourage and flexibility.

Deep Analysis: Implications, Necessity, Overlaps, Conflicts, and Lingering Challenges

Although these improvements have been made, there are still major overlaps in place. There is an overlap of the group insolvency regime in Chapter VA with avoidance of transaction regimes, which makes it a more complex task to pursue claims as a creditor in affiliated corporations. There are also clashes with the Prevention of Money Laundering Act (PMLA) since Clause 19 presents a clean-sheet doctrine which eliminates pre-plan claims that is inconsistent with Enforcement Directorate (ED) attachment powers and which is seen in the case of Bhushan Power. Without the presence of clear supremacy clauses, there will be the risk of litigation, hence the targeted revival goals will be compromised. The condensed liquidation schedule has other complexities. The multi-jurisdictional, complicated valuation processes might force over-sale at undervalued prices, thus going against the principle of equitable distribution in Section 53. Equally, when the Bill strengthens cross-border mechanisms, partial reciprocity under UNCITRAL structures poses the risk of fragmented implementation and extends dispute resolution.

Necessity of Reform

The Bill has a mandatory admission provision that has provided a 14-day timetable and a financial record constitute conclusive proof, thus ascertaining that default instigates a resolution devoid of subjective impediments. According to India Board of Bankruptcy (IBBI) data, delaying releases of admissions in resolutions amounts to 50 per cent of the total resolutions time wasting confidence and operational efficiency. Similar strict provisions have proven to minimize timelines by 2030 Singapore has shown comparative evidence that such stringent provisions can help decrease the timelines. In addition, there was a need to empower creditors: in the past, nominations of the initiation and resolution processes (RP) were abused by debtors. The recent creditor-led mechanism, requiring 51% debt level, discourages debtor inertia, and complies with U.S. Chapter11 structures, in which restructuring is under the guidance of creditor committees.

Overlaps and Conflicts

Although these improvements have been made, there are still major overlaps in place. There is an overlap of the group insolvency regime in Chapter VA with avoidance of transaction regimes, which makes it a more complex task to pursue claims as a creditor in affiliated corporations. There are also clashes with the Prevention of Money Laundering Act (PMLA) since Clause 19 presents a clean-sheet doctrine which eliminates pre-plan claims that is inconsistent with Enforcement Directorate (ED) attachment powers and which is seen in the case of Bhushan Power. Without the presence of clear supremacy clauses, there will be the risk of litigation, hence the targeted revival goals will be compromised. The condensed liquidation schedule has other complexities. The multi-jurisdictional, complicated valuation processes might force over-sale at undervalued prices, thus going against the principle of equitable distribution in Section 53. Equally, when the Bill strengthens cross-border mechanisms, partial reciprocity under UNCITRAL structures poses the risk of fragmented implementation and extends dispute resolution.

Conclusion

The Bill addresses key gaps in the IBC but success hinges on implementation. While necessary, its patchwork refinements, without deeper structural reforms like debtor-in-possession models or independent CoC oversight, may limit efficacy. A comprehensive overhaul, coupled with stronger institutional capacity, is essential for long-term sustainability of India’s insolvency framework.

Author: Amrita Pradhan, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney. 

References

1.     The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, Bill No. 107 of 2025, Lok Sabha (India), https://prsindia.org/files/bills_acts/bills_parliament/2025/The_Insolvency_and_Bankruptcy_Code_(Amendment)_Bill,2025.pdf.

2.     The Insolvency and Bankruptcy Code, 2016, No. 31 of 2016, India Code (2016), https://ibbi.gov.in/uploads/legalframwork/3f944ca850e20b5004117344fa4b1f0e.pdf.

3.     U.N. Comm’n on Int’l Trade Law, UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation, U.N. Sales No. E.14.V.2 (2014), https://uncitral.un.org/en/texts/insolvency/modellaw/cross-border_insolvency.

4.     Kalyani Transco Ltd. v. Bhushan Power & Steel Ltd., Civil Appeal No. 3037 of 2025 (India May 2, 2025).

5.     The Prevention of Money Laundering Act, 2002, No. 15 of 2003, India Code (2003), https://www.indiacode.nic.in/bitstream/123456789/2066/1/A2003-15.pdf.

6.     Bhushan Power & Steel Ltd. v. Directorate of Enforcement, W.P.(Crl.) 3028/2024 (Delhi H.C. Feb. 7, 2025).

7.     Insolvency & Bankr. Bd. of India, Annual Report 2023-24 (2024), https://ibbi.gov.in/en/annual-report.

8.     Ministry of Law, Singapore, Committee to Strengthen Singapore as an International Centre for Debt Restructuring: Report (Apr. 20, 2016), https://www.mlaw.gov.sg/news/press-releases/2016/04/committee-to-strengthen-singapore-as-an-international-centre-for-debt-restructuring-report.

9.     PRS Legislative Research, The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (Aug. 2025), https://prsindia.org/billtrack/the-insolvency-and-bankruptcy-code-amendment-bill-2025.