India's Insolvency and Bankruptcy Code (IBC) amendments notified this week mark one of the most consequential resets of the insolvency framework since 2016, with the government attempting to tackle a problem lenders have long flagged at the ground level: delay-led value erosion.
Insolvency data shows financial creditors recover only around 30-33% of admitted claims, but that recovery typically comes after 700–800 days of proceedings. By then, bankers say, the time value of money, interest costs, provisioning and opportunity losses significantly reduce the real economic value of recoveries. Liquidation has been even slower, with asset sales taking well over 600 days on average, leaving capital locked up for years.
The amendments seek to address this by tightening timelines, reducing litigation levers, and decisively shifting control toward creditors.
Faster Entry, Fewer Roadblocks
At the front end, the National Company Law Tribunal (NCLT) must now decide on admitting insolvency cases within 14 days, and record written reasons if it fails to do so. Admission itself earlier took up to four months, allowing defaulting companies to drag proceedings through technical objections.
Akshat Pande, managing partner at Alpha Partners, said the provision directly targets accountability gaps. “By discouraging frivolous interim applications and reinforcing adherence to statutory timelines, the law seeks to curb dilatory tactics frequently employed by corporate debtors,” he said.
Equally important is the clarification that a record of default from information utilities is sufficient proof for admission, sharply reducing document‑based disputes that stalled cases at the threshold.
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Out‑Of‑Court Insolvency: Speed Over Process
Perhaps, the most significant shift for lenders is the introduction of a creditor‑initiated, largely out‑of‑court insolvency resolution process, which can be triggered with approval from 51% of financial creditors by value and must be completed within 150 days.
This gives banks a faster option to resolve stressed assets without immediately entering the NCLT pipeline, where backlogs and litigation have historically slowed outcomes.
Raunak Dhillon, partner at Cyril Amarchand Mangaldas, said the new route is likely to boost confidence among lenders and investors. “With the introduction of creditor‑led and out‑of‑court mechanisms, alongside cross‑border and group insolvency provisions, the amendments aim to address existing gaps that have led to increased litigation and value erosion at times,” Dhillon said.
For cases where resolution fails, liquidation, often the worst‑case outcome for lenders, has also been overhauled.
Liquidation orders must now be passed within 30 days, with the entire process capped at 180 days (extendable once). Crucially, the Committee of Creditors (CoC) will now supervise liquidation, while liquidators' quasi‑judicial powers have been curtailed.
Prakhar Parekh, partner at Rashmikant & Partners, said this closes a major accountability gap. “By expanding Committee of Creditors oversight into liquidation, and defining withdrawal stages to prevent late‑stage disruption of CIRP, the legislature seeks to remove procedural bottlenecks,” he said.
The amendments also require secured creditors to realise security interests within 14 days in liquidation, failing which the asset is deemed relinquished to the estate, a move aimed at preventing selective delays by lenders themselves.
Fewer Exits, Cleaner Process
Another frequent complaint from lenders has been late‑stage withdrawals, where promoters settled after resolution plans were invited, wasting months of effort and cost.
The revised framework now bars withdrawals before CoC constitution and after issuance of Form G, unless backed by 90% creditor approval. This narrows the window for tactical exits and increases pressure on promoters to settle early.
“This would not only effectuate timely CIRP admissions but also obliterate chances of future litigation owing to the erstwhile ambiguity," Amir Bavani, founder of AB Legal said.
The amendments also widen the duty to cooperate with resolution professionals to include past management and associated persons, a recurring hurdle in tracing assets and avoidance transactions.
Beyond speed and control, the government has also attempted to realign the Code with its original objective, rescuing companies, not liquidating them, explains Shiv Sapra, partner at Kochhar & Co.
“For too long the Code was considered as a tool for recovery of monies rather than revival… In essence, the amendments fundamentally re‑engineer IBC from a court driven process to a creditor driven one,” he said.
He added that provisions on group insolvency, cross‑border coordination, and withdrawal from voluntary liquidation will particularly help large infrastructure and EPC groups, where stress often spans multiple SPVs.
While group insolvency has been positioned as a major enabler for lenders dealing with complex corporate structures, some experts caution that its real‑world impact will depend heavily on how the framework is operationalised. Suhael Buttan, partner at SKV Law Offices, notes that the newly introduced Chapter VA allows the government to coordinate insolvency proceedings of group companies through shared benches, common resolution professionals and joint creditor committees.
“However, the framework is entirely dependent on subordinate legislation that must itself pass through a demanding parliamentary draft‑laying process, meaning its benefits remain prospective,” he said.
Buttan also points out that while the architecture is broad enough to capture most corporate groups, it does not yet address sector‑specific challenges, particularly in real estate. Issues such as project‑wise completion timelines, the dual status of homebuyers, the RERA‑IBC overlap and the risk of contagion across project SPVs remain unresolved, limiting the immediate utility of group insolvency for property developers.
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