IBC Insights February 2025 – Monthly Newsletter for Insolvency Matters
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India’s Finance Minister Nirmala Sitharaman has introduced The Insolvency And Bankruptcy Code (Amendment) Bill, 2025, a pivotal legislative measure aimed at significantly overhauling the Insolvency and Bankruptcy Code (IBC), 2016. This bill introduces a series of transformative changes designed to expedite insolvency proceedings, maximise asset value, and align India’s framework with global best practices. The proposed amendments focus on three key areas: a new creditor-initiated resolution process, streamlining the admission of insolvency applications, and establishing a robust framework for group and cross-border insolvency.
Proposed Changes in the Amendment 2025
Creditor Initiated Insolvency Resolution: One of the most significant changes is the introduction of a creditor-initiated insolvency resolution process (CIIRP). This new mechanism allows select financial institutions to bypass the traditional court-based process and initiate insolvency proceedings outside of court. This is a game-changer, designed to tackle delays and preserve the value of distressed assets. Under CIIRP, a corporate debtor continues to manage the company, but with crucial oversight from a resolution professional who has veto powers and attends board meetings.
The process includes a 30-day window for the corporate debtor to raise objections. If a resolution plan is not reached within 150 days or is rejected, the adjudicating authority can convert the CIIRP into a standard Corporate Insolvency Resolution Process (CIRP). This structure ensures that while the process is fast-tracked, there are still sufficient safeguards in place. The ultimate goal is to facilitate swift and efficient resolution for genuine business failures, thereby reducing the burden on courts and ensuring a smoother transition for all stakeholders.
Expeditious Admission of Insolvency Applications: The current system is plagued by delays, with insolvency applications often taking over 434 days to be admitted, far exceeding the prescribed 14-day limit. To address this, the new bill proposes a crucial modification to Section 7 of the IBC. The amendment specifies that an application for initiating a CIRP will be admitted solely on the existence of a default. This means that the adjudicating authority will no longer be bogged down by considering extraneous grounds, thereby making the admission process more efficient.
Furthermore, the bill stipulates that a financial institution’s application, supported by records of default from information utilities, will be considered sufficient evidence. This change is expected to drastically reduce the time taken for admitting applications, ensuring that the insolvency resolution process can begin without unnecessary and costly delays.
The Proposed Framework for Group Insolvency: The current IBC framework treats insolvency on a standalone basis, which is a major drawback given that many companies operate within complex, interconnected groups. The new bill introduces a dedicated Chapter V-A to address this issue. This new chapter empowers the central government to create rules for coordinated or consolidated insolvency proceedings for group companies. This move will prevent the duplication of efforts, reduce costs, and enable a more holistic approach to resolving the insolvency of a corporate group, bringing India’s legal framework in line with international standards.
In a similar vein, the bill also tackles the inefficiencies of the existing cross-border insolvency framework, which is currently limited to bilateral agreements. A new Section 240C is proposed, empowering the central government to establish comprehensive rules for managing cross-border insolvency cases. The bill also provides for the designation of a dedicated bench to handle these proceedings, ensuring a more predictable and streamlined process for cases involving foreign jurisdictions. These amendments are a clear signal of India’s commitment to creating a modern, efficient, and globally competitive insolvency regime.
Expositor(s): Adv. Archana Shukla