Introduction
The Insolvency and Bankruptcy Code (IBC), 2016, is undergoing its most significant overhaul to date with the introduction of the IBC (Amendment) Bill, 2025. This legislative push is closely linked with a series of recent discussion papers released by the Ministry of Corporate Affairs (MCA) and the Insolvency and Bankruptcy Board of India (IBBI). The core objective is to transition from a process plagued by “judicial discretion” and “procedural bottlenecks” to one defined by “mandatory timelines” and “institutional transparency.” By addressing gaps in admission, liquidation, and group insolvency, the 2025 reforms aim to solidify the Code’s role as a tool for value maximization rather than a mere debt recovery mechanism.
Key Proposals and Discussion Highlights
1. Mandatory Admission and the “End of Discretion”
A primary focus of the discussion has been the “14-day rule.” Following the Vidarbha Industries judgment, which allowed the NCLT discretion to reject even proven defaults, the Bill mandates that if a debt and default are established specifically through a record from an Information Utility (IU), the NCLT must admit the case within 14 days. This change aims to restore the “literal interpretation” of the Code and eliminate extraneous factors that have historically delayed the initiation of the CIRP.
2. Creditor-Initiated Insolvency Resolution Process (CIIRP)
One of the most innovative concepts introduced is the CIIRP—a largely out-of-court mechanism. Unlike the traditional CIRP, where control immediately shifts to a Resolution Professional (RP), the CIIRP adopts a “debtor-in-possession” model. This allows the existing management to run the company under RP supervision, aiming to prevent the “value erosion” and “business disruption” often triggered by a change in management. This process is intended for genuine business failures and requires a 51% approval from financial creditors to initiate.
3. Strengthening the “Clean Slate” and Section 32A
Discussion papers have underscored the need for stricter disclosures regarding Section 32A (immunity from past offenses). To ensure that the “clean slate” principle is not misused, the new framework mandates:
- Beneficial Ownership Disclosure: Resolution Applicants must disclose the natural persons who ultimately control them.
- Due Diligence Recording: The Committee of Creditors (CoC) is now required to formally record their deliberations on an applicant’s eligibility under Section 29A to reduce future litigation risk.
4. Real Estate and Homebuyer Safeguards
Reflecting the unique challenges of the real estate sector, the reforms propose:
- Project-wise Resolution: Allowing for separate resolution plans for different projects within a single company.
- Mandatory Inclusion: The Information Memorandum (IM) must now include details of all allottees (homebuyers) as per the company’s books, even if they have not formally filed a claim, ensuring they are not excluded from the resolution plan.
5. Reform of the Liquidation Process
The Bill proposes a significant shift in power during liquidation. The liquidator’s quasi-judicial powers to admit or reject claims are removed; instead, the CoC will supervise the liquidation process. The CoC (with a 66% vote) is also empowered to replace the liquidator. Furthermore, a “restoration” clause allows a company to move from liquidation back to the resolution stage for a 120-day window if a viable buyer emerges.
6. Group and Cross-Border Frameworks
Recognizing the complexity of modern conglomerates, the Bill introduces enabling provisions for Group Insolvency, allowing for the simultaneous resolution of interconnected entities. It also empowers the Central Government to frame rules for Cross-Border Insolvency, aligning Indian law with UNCITRAL Model Laws to handle assets and creditors across international jurisdictions.
Conclusion
The 2025 amendments and the accompanying regulatory discussions signal a “coming of age” for India’s insolvency regime. By narrowing the scope for judicial intervention at the entry stage and empowering the Committee of Creditors with greater oversight during the exit (liquidation) stage, the government is placing the commercial wisdom of creditors at the center of the process. While challenges remain particularly regarding the capacity of the NCLT and the digital infrastructure needed for CIIRP these reforms provide a clear roadmap for a faster, more predictable, and investor-friendly insolvency landscape in India.
Expositor(s): Adv. Shreya Mishra
