FM Sitharaman tables IBC Amendment Bill, cross-border and group insolvency frameworks introduced

IBC

Finance Minister Nirmala Sitharaman on Tuesday introduced the much-awaited Insolvency and Bankruptcy Code (IBC) Amendment Bill, 2025 – which brings in key reforms including the group insolvency and cross-border insolvency frameworks, as well as the creditor led resolution process. The Bill has been referred to a select committee for further deliberations.

The Code mandates that insolvency applications be admitted within 14 days, but presently, an average of over 434 days is being taken, leading to considerable value loss for the corporate debtor. To address this situation, section 7 is being modified to specify that an application for initiating the corporate insolvency resolution process by the financial creditors shall be admitted if a default exists, and no other grounds shall be considered for deciding such an application.

It is also clarified that when an application is made by a financial creditor who is a financial institution, the Adjudicating Authority shall consider records of default from information utilities as sufficient evidence to ascertain the existence of such default. This change will reduce timelines for admitting applications related to financial debt, says the Bill’s statement of objects and reasons.

“The proposed amendments aim to reduce delays, maximise value for all stakeholders, and improve governance of all processes under the Code,” the statement said.

In the statement, the FM said that it has become necessary to amend certain provisions of the Code and to insert certain new provisions for effective its implementation.

"The proposed amendments aim to reduce delays, maximise value for all stakeholders, and improve governance of all processes under the Code. They seek to modify existing provisions to better align with the overall objectives of the Code and to introduce new provisions that follow global best practices for resolving insolvency," the statement noted.

The 'creditor-oriented insolvency resolution process' (COIRP) is an out-of-court initiation mechanism for genuine business failures to facilitate faster and more cost-effective insolvency resolution, with minimal business disruption. Once implemented, this will help ease the burden on judicial systems, promote ease of doing business and improve access to credit, the statement said.

The group insolvency framework seeks to efficiently resolve insolvencies involving complex corporate group structures, minimising value destruction caused by fragmented proceedings and maximising value for creditors through coordinated decision-making. And the cross-border insolvency framework seeks to lay the foundation for protecting stakeholder interests in domestic and foreign proceedings, promoting investor confidence and aligning domestic practices with international best practices. "This will also pave the way for improved recognition of Indian insolvency proceedings in other jurisdictions," said the statement.

Moreover, the new Bill seeks to insert new sub-sections (1A) and (1B) to section 33 of the IBC to restore the corporate insolvency resolution process in exceptional cases, provided that the committee of creditors makes such a request by an application.

Sources say, the new provision has been added to avoid a repeat of the JSW Steel-BPSL May 2 judgement of the Supreme Court, which had earlier cancelled the JSW Steel’s acquisition of Bhushan Power and Steel Ltd.

The judgement was later recalled, and the matter was reheard. The Supreme Court concluded the re-hearing on the case on Monday, and has reserved its verdict on the same.

According to the statement, the new bill proposes that the AA can only restore the process if it is satisfied that the following circumstances under sub-section (1) exist-first, no resolution plan has been approved within the period stipulated under the Code, or second, the resolution plan approved by the committee of creditors has been rejected, explained the statement.

"After considering the application, the Adjudicating Authority will determine if the application demonstrates that there is still some potential to resolve the insolvency of the corporate debtor and may, by an order, restore the process. This ensures that errors, which cause either the process not to be completed on time or the resolution plan to be rejected, do not prevent a corporate debtor from successfully resolving insolvency and avoid forcing it into liquidation," the statement said.

Additionally, the proposed amendments expand the definition of resolution plans to include sale of assets, and the right of the corporate applicant to propose the resolution professional is restricted to ensure fairer and more transparent appointments. The priority of government dues is clarified, as per the legislative intent.

Dhananjay Kumar, Partner, Cyril Amarchand Mangaldas said: "The introduction of regimes for group insolvency and cross-border insolvency are welcome. The need for group insolvency was felt in many cases. Similarly lack of cross border insolvency regime had tied the hands of many stakeholders and affected recoveries. The flexibility retained by the Government to designate special benches for cross-border cases is fit-for-purpose."

Alay Razvi, Managing Partner, Accord Juris notes that while these reforms promise to reduce delays and strengthen India’s business environment, concerns remain over enforcement complexities, judicial bottlenecks, and the need to balance creditor power with robust protections for operational creditors to ensure equitable and truly effective resolutions.

"One of the major incidences of delay in the corporate insolvency resolution process has been at the admission stage which has negatively impacted outcomes. Limiting the adjudicating power of NCLT to admit or reject the application inter alia basis default will provide the necessary impetus for timely outcomes at the first stage itself," said Siddharth Srivastava, Partner at Khaitan & Co.

However, Mukesh Chand, Senior counsel, Economic Laws Practice says the Bill leaves out other complex issues such as inter-se priority among secured creditors, treatment of look-back transactions in personal insolvency, and certain procedural and jurisdictional challenges, which remain to be addressed for a more comprehensive reform.