IBC Amendment Bill 2025 Promises Quicker Debt Resolutions and Stronger Creditor Power: Know More [Read Bill]

The government has introduced a major reform to India’s insolvency framework with the Insolvency and Bankruptcy Code (Amendment) Bill, 2025. Presented in the Lok Sabha by Finance Minister Nirmala Sitharaman, the Bill seeks to reduce long delays in insolvency cases, strengthen creditor control, and make the resolution process more efficient.

Cutting Down Delays in Insolvency Admissions – Section 7 Amendment

At present, corporate insolvency applications must be admitted within 14 days under the IBC. In reality, the process takes an average of 434 days, eroding asset value and reducing recoveries for creditors. The Bill proposes to amend Section 7 of the IBC so that the adjudicating authority will only check if a payment default exists before admitting a case.

For financial institutions, records from approved information utilities will be considered sufficient proof of default. This change is aimed at cutting out unnecessary steps and speeding up case admissions.

New Creditor-Initiated Insolvency Resolution Process – New Enabling Provisions

The Bill introduces the CIIRP, allowing a notified class of financial creditors holding at least 51% of debt value to start insolvency outside of court. The process will be run through a financial institution under the supervision of a resolution professional.

• The debtor can keep day-to-day control but under professional oversight.
• Objections must be raised within 30 days.
• If no resolution is achieved within 150 days, it will convert into a standard Corporate Insolvency Resolution Process (CIRP).

Expanding and Strengthening the Resolution Process – Changes to Section 5(26), Section 12A, and Related Provisions

The Bill proposes several reforms to make the corporate insolvency resolution process (CIRP) smoother:

• Section 5(26): Resolution plans will now explicitly include the sale of assets as part of the restructuring strategy. This widens the options for resolving insolvency and maximising value recovery.
• Section 10: A corporate debtor starting its own insolvency proceedings will no longer have the right to propose the interim resolution professional. This is to ensure impartiality in the process.
• The Bill clarifies where government dues stand in the recovery order. This aims to reduce disputes and give creditors more certainty on recoveries.
• Section 12A: The Bill tightens the withdrawal of admitted CIRP applications. Withdrawal will now require 90% approval from the Committee of Creditors (CoC) and will be subject to stricter timelines. This is to prevent misuse of the process after it starts.

A monitoring committee will oversee the implementation of approved plans, while the Committee of Creditors (CoC) will have greater powers during liquidation, including the ability to replace a liquidator with a two-thirds majority vote.

Group Insolvency for Coordinated Proceedings – New Chapter V-A

The Bill introduces a new Chapter V-A to handle group insolvency cases. This will allow coordinated or consolidated insolvency proceedings for multiple companies in the same group.

Key features include:

• Shared benches for related cases.
• Coordinated Committees of Creditors.
• Common resolution professionals or liquidators.
• Enforceable inter-company agreements.

This framework aims to reduce duplication, lower costs, and maximise value recovery.

Stronger Cross-Border Insolvency Framework – New Section 240C

The Bill adds a new Section 240C, empowering the government to create rules for cross-border insolvency and to designate dedicated benches for such matters. This moves India beyond its current system, which relies mainly on bilateral agreements with other countries.

Clarification on Security Interest – Amendment to Section 3

A “security interest” will only exist if it is created through an agreement between parties. Statutory claims such as tax dues will not automatically be treated as secured debt.

Definition of Service Provider

The term now covers insolvency professionals, agencies, information utilities, and other persons notified by the Insolvency and Bankruptcy Board of India (IBBI).

Fraudulent and Wrongful Trading Actions

If a resolution professional or liquidator does not act against fraudulent or wrongful trading, creditors will have the right to approach the tribunal directly.

Liquidation Process Timelines and Rules

Secured creditors must decide within 14 days whether they will enforce their security outside liquidation. If they do, they must contribute towards workmen’s dues and process costs.

Additional Reforms for Transparency and Governance

Other important provisions include:

• The interim moratorium under Part III for personal guarantors is removed, preventing delays in recovery actions against guarantors.
• A new government-managed electronic portal will be created for all IBC processes, making filings, tracking, and information access easier.
• Sections 239 and 240 are amended to let IBBI make regulations not just for specific provisions but for the overall purposes of the Code, expanding its regulatory scope.
• Decriminalisation of certain procedural offences under the IBC.
• The existing fast-track CIRP under Chapter IV of Part II is removed from the Code.

The IBC Amendment Bill 2025 has been referred to a Select Committee for detailed review. Once passed, it is expected to make India’s insolvency process faster, more transparent, and more aligned with its original intent when the IBC was enacted in 2016.

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