Parliament has passed Insolvency and Bankruptcy Code (Amendment) Bill, 2026, amending Insolvency and Bankruptcy Code to address procedural delays, litigation issues, and inefficiencies. It aims to strengthen time-bound resolution, reduce delays, and improve creditor confidence
Key Changes in Insolvency Process
Faster Admission and Strict Timelines
The Adjudicating Authority (National Company Law Tribunal) must:
- Admit/reject CIRP applications within 14 days
- Record reasons for delays
A record of default from information utilities will be treated as sufficient proof, limiting discretionary delays.
Withdrawal and Restoration of CIRP
- Withdrawal allowed only through Resolution Professional (RP) with 90% CoC approval
- Not allowed before CoC formation or after inviting resolution plans
A new provision allows one-time restoration of CIRP (with 66% CoC approval) for up to 120 days, if no plan is received.
Resolution Plan Reforms
- Introduces two-stage approval (implementation first, distribution later)
- Allows rectification of defects before rejection
- Expands definition to permit asset-wise resolution (sale of assets separately)
Clean Slate Principle (Codified)
- Legally incorporates the “clean slate” principle (from Essar Steel case), ensuring that the successful bidder is not burdened with past liabilities.
Dissenting Creditors & Government Dues
- Dissenting financial creditors get the lower of liquidation value or proportional distribution.
- Government dues deprioritised in the waterfall mechanism (clarifying earlier legal ambiguity).
Secured Creditors & Priority
- Secured creditors are recognised only to the extent of their security value, and inter-creditor agreements are respected.
Avoidance Transactions
- Look-back period extended (from filing date, not admission date)
- Covers transactions during pending period
- Expanded scope to include related party assets
Guarantor Assets
- New provision allows transfer of guarantor assets during CIRP, subject to CoC approval and legal compliance.
Liquidation Reforms
- CoC becomes supervisory body during liquidation
- RP cannot become liquidator
- Liquidator appointed via IBBI recommendation and replaceable with 66% CoC vote
Direct Dissolution
- Allows direct dissolution after failed CIRP with 66% CoC approval, reducing delays.
NCLAT Timelines
- Appeals must be disposed of within 3 months by the National Company Law Appellate Tribunal.
Personal Insolvency & Penalties
- Removes interim moratorium for personal guarantors
- Introduces penalties for frivolous proceedings
- Decriminalises certain offences → replaced with civil penalties
Structural Reforms Introduced
Creditor-Initiated Insolvency (CIIRP)
A new out-of-court insolvency mechanism:
- Initiated by creditors (51% approval)
- Management remains with board (RP supervises)
- No automatic moratorium
- Timeline: 150 days (+45 days extension)
- Can convert into CIRP if failed
Objective: Reduce burden on tribunals and enable early resolution.
Group Insolvency Framework
Introduces provisions for coordinated insolvency of corporate groups:
- Common bench, joint CoC, coordinated proceedings
- Reduces inconsistency and judicial discretion
Cross-Border Insolvency
Empowers government to frame rules for:
- Recognition of foreign proceedings
- Judicial cooperation
- Coordination in global insolvency cases
About Insolvency and Bankruptcy Code (IBC), 2016
The IBC provides a time-bound framework for resolving insolvency of:
- Companies
- Partnerships
- Individuals
Key features:
- Creditor-driven process
- Overseen by NCLT
- Regulated by Insolvency and Bankruptcy Board of India
- Focus on revival or orderly liquidation
Performance of IBC
- 1,376 companies resolved (till Dec 2025)
- ₹4.11 lakh crore recovered
- Average recovery: ~34% of claims
- Indicates improved credit discipline, though scope for efficiency improvement remains.