Revamping Insolvency: New Amendment Bill Targets Speed and Efficiency

On Tuesday, Finance Minister Nirmala Sitharaman introduced the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 in the Lok Sabha, a legislative move aimed at expediting insolvency procedures and bolstering governance. As the bill proposes significant changes to the 2016 Insolvency and Bankruptcy Code (IBC), it has been directed to a Select Committee for thorough scrutiny.

The proposed amendments introduce pivotal measures such as the Creditor-Initiated Insolvency Resolution Process (CIIRP) and other provisions intended to enhance the efficiency of the resolution and liquidation stages. Despite existing laws mandating the admission of corporate insolvency applications within two weeks, the process averages 434 days. An amendment to Section 7 aims to address this inefficiency by mandating admission based on existing defaults alone.

The bill suggests significant reforms, including relying on information utilities as evidence for financial institutions, expanding resolution plan definitions to incorporate asset sales, and restricting the influence of corporate applicants in proposing resolution professionals. Additional provisions clarify government dues priority, introduce stringent controls on withdrawal of CIRP applications, and empower a monitoring committee to implement plans. Creditors gain the right to initiate proceedings, and the Committee of Creditors (CoC) may directly oversee liquidation processes, replacing liquidators if necessary by a two-thirds vote.

To fast-track proceedings, the CIIRP enables selection of financial institutions and initiation of insolvency cases outside court supervision, while allowing debtor management retention under professional oversight. Objections can be made within 30 days, with the authority able to convert processes to standard CIRP if resolutions are unmet within 150 days. A new Chapter V-A addresses group insolvency proceedings, facilitating coordinated operations. Additionally, Section 240C is introduced to manage cross-border insolvency, enhancing the framework for international cases.

Other reforms include removing interim moratoriums for personal guarantors, curbing fraudulent practices, introducing an electronic portal for IBC processes, granting more regulatory power to the IBBI, and decriminalizing certain offences.

(With inputs from agencies.)