The Insolvency and Bankruptcy Code (Amendment) Bill, 2025: Key Highlights

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (the “Bill”) was introduced in the Lok Sabha on August 12, 2025. The bill proposes major changes to the Insolvency and Bankruptcy Code, 2016, addressing difficulties observed in its implementation and aligning it with global best practices.

The bill has been referred to a Select Committee of Parliament, which is expected to submit its report before the Winter Session (late November 2025). It will then be tabled for approval.

Key changes:

1. Initiation of Corporate Insolvency Resolution Process (CIRP)

• • The bill mandates that the NCLT shall admit or reject a CIRP application from a financial creditor within 14 days.
  • Admission is mandatory if:

1. 1. 1. Debt and default are established, and
      2. No disciplinary proceedings exist against the proposed interim resolution professional (IRP).

• • Records of default from information utilities will constitute sufficient proof of default.
  • If defects exist, applicants get 7 days to rectify them.
  • Companies filing for CIRP need not nominate an IRP; the NCLT will seek a recommendation from the Insolvency and Bankruptcy Board of India (IBBI).

2. Withdrawal of Insolvency Proceedings

• • CIRP withdrawal requires 90% approval of the Committee of Creditors (CoC).
  • Withdrawal is not permitted before the CoC constitution or after the first invitation for resolution plans.
  • Voluntary liquidation withdrawal is now possible via special shareholder resolution and, if required, creditors’ approval of 2/3 in value.

3. Re-initiation of CIRP

• • CIRP can be restored once before liquidation if:

1. 1. 1. No resolution plan is received, or
      2. A submitted plan is rejected.

• • The restoration period is capped at 120 days.
  • CIRP may also be reinstated if an approved resolution plan is contravened.

4. Resolution Plans

• • NCLT must pass orders on plans within 30 days or record reasons for delay.
  • CoC may rectify defects identified by the NCLT.
  • Antitrust approvals must be obtained before submission to NCLT, not prior to CoC approval.
  • Licenses, approvals, and concessions are protected if compliance is maintained.
  • An Implementation Committee will oversee execution.
  • The clean-slate principle codified: past claims against the corporate debtor are extinguished, without affecting claims against guarantors or promoters.

5. Payments to Dissenting Creditors: Dissenting financial creditors are to receive the lower of liquidation value or entitlement under the plan applying the waterfall mechanism.
6. Liquidation Process

• • Liquidation must be completed within 180 days, extendable by 90 days.
  • Voluntary liquidation: completion within one year.
  • CoC supervises liquidation and may directly dissolve the company.
  • The moratorium was extended to bar enforcement of security interests while permitting the liquidator to act with NCLT approval.
  • CoC can appoint or replace liquidators with 66% approval.

7. Liquidation Waterfall and Security Enforcement

• • Secured creditors are limited to the value of security; government dues are not treated as secured claims.
  • Creditors must notify the liquidator within 14 days if enforcing security outside liquidation.
  • Assets of personal or corporate guarantors can be sold with CoC approval, ensuring proceeds flow appropriately to respective insolvency estates.

8. Avoidance Transactions and Fraudulent Trading

• • The look-back period was extended to include pending CIRP applications.
  • Creditors may challenge preferential, undervalued, or extortionate transactions and fraudulent/wrongful trading.
  • Proceedings survive completion of CIRP, liquidation, or dissolution.

9. Creditor-Initiated Resolution Process (CLRP)

• • A new mechanism for certain categories of corporate debtors, allowing creditor-initiated resolution outside the traditional CIRP framework.
  • Requires 51% creditor approval, with debtor management retained but monitored by the RP.
  • The process is to be completed in 150 days, extendable by 45 days.
  • Non-compliance or failure to receive a plan can lead to conversion into CIRP.

10. Group Insolvency: Rules for coordinated resolution of group entities, including common bench, common RP, and common CoC, to be prescribed by the government.
11. Personal Insolvency

• • Interim moratorium for personal guarantors scrapped.
  • Bankruptcy is allowed if no repayment plan is filed.
  • Government dues were reprioritized; frivolous filings were penalized.

12. Common Reforms

• • IBBI powers expanded to regulate service providers and CoC conduct, impose penalties, and suspend registrations.
  • Operational creditors must file data with information utilities; non-authentication by debtors is deemed valid.
  • An electronic portal to streamline processes.
  • Framework for cross-border insolvency, possibly aligned with the UNCITRAL Model Law.

The Bill represents a comprehensive overhaul of the IBC, addressing judicial ambiguities, strengthening creditor rights, and introducing modern tools such as CLRP, group insolvency, and cross-border insolvency. If enacted, it is expected to streamline insolvency processes, reduce delays, and enhance confidence in India’s insolvency framework, bringing it closer to international best practices.