Decoding The Insolvency And Bankruptcy Code (Amendment) Bill, 2025
The IBC Amendment Bill 2025 is a robust statutory response to the IBC's most troublesome pain points.
Long-awaited move to plug gaps and align with the global best practices and strengthen the overall Insolvency and Bankruptcy Code is the reason behind the recent proposed Amendment of IBC placed on Aug. 12 before the Lok Sabha.
The Insolvency and Bankruptcy Code (Amendment) Bill of 2025 addresses these persistent issues through a set of focused statutory reforms.
Glimpse of Key Proposed Amendments
Stricter Timeframes for Insolvency: The Bill significantly amends sections 7(5), 9(5), and 10(4), requiring the NCLT to admit or reject insolvency applications within 14 days, with written reasons for any delay. This curbs the chronic initial delays that undermined creditor value and certainty, promising to transform the first phase of insolvency litigation. It would be tested with times; how practical these would be adhered to these timelines.
Cascade of Government Dues: The Bill amends the waterfall arrangement to put government claims lower in priority, ensuring that dues to the Centre or States, whether or not backed by a statutory charge, do not rank alongside secured creditors. Recent dues from the two years before liquidation are slotted into a mid-tier priority, while older amounts fall even further down, reinforcing predictability in recoveries for financial creditors and overturning the elevated treatment such claims had received under earlier rulings.
Creditor-Initiated Out-of-Court Insolvency: A noteworthy new mechanism allows notified classes of financial creditors to initiate insolvency out of court after a public announcement, shifting uncontested cases out of the tribunal backlog and promoting efficiency. Debtors retain objection rights (section 58C), and conversion to regular CIRP is possible on NCLT satisfaction, adding a layer of procedural check. It is pertinent to mention that only the financial creditors holing 51% of the total debt owed by the debtor are eligible to initiate out-of-court insolvency.
Introduction to Group Insolvency Coordination: By adding a new chapter, the Bill empowers central rulemaking for group insolvency, supporting coordinated benches, common professionals, and consolidated committees. This helps corporates having multiple entities in multiple jurisdiction going though insolvency. However, the cross defaults, and inclusion and exclusions would be the key to successful handling of Group Insolvency.
Committee of Creditors and Related Parties: The Bill revises voting calculations to exclude related-party debt and extends CoC oversight into liquidation, ensuring only real stakeholders can drive outcomes. Withdrawal of CIRP after constitution of CoC now requires a 90% voting share under section 12A, tackling the problem of collusive filings and ‘forum shopping’.
Cross-Border Insolvency Framework: Government now prescribes detailed framework and rules for cross-border coordination, referencing international models like UNCITRAL. This offers large and multinational debtors, and their advisers, a workable path for global recovery and recognition.
Preserving Assets and Levying Hefty Penalties: Moratorium protections are now extended into liquidation (section 33) and look-back periods for suspect transactions begin at the initiation, not admission date (sections 43, 46, 50), capturing pre-filing mischief. The Bill also imposes heavy penalties on frivolous or vexatious proceedings (section 64A) up to Rs 2 crore to deter litigation abuse.
Deal with Insolvency Professionals: Under the updated regime, only professionals with valid registration, requisite sectoral experience, and no pending disciplinary proceedings will be eligible for appointment by the NCLT or DRT. Importantly, withdrawal of consent or refusal to accept an assignment by an assignment by an IP/RP is restricted and must be justified to the Tribunal; an unjustified refusal can lead to temporary removal from future panels.
Verification of claims from RP to Liquidator: Previous conundrum is now resolved by allowing the liquidator to rely on the verified claims list prepared by the Resolution Professional during the CIRP. Only updates or new facts arising after the CIRP will require additional verification. Contingent and uncrystallized claims can be admitted and estimated as necessary, ensuring a smoother and faster transition to liquidation, and reducing procedural disputes.
Removal of Interim Moratorium for Personal Guarantors: The Amendment deletes this blanket stay, allowing creditors to pursue enforcement against personal guarantors immediately, even as the CIRP proceeds against the company. This change aligns the IBC with global standards and prevents tactical delays, making recoveries more straightforward for banks and financial institutions.
Decriminalization of minor provisions: The Bill decriminalizes routine errors, such as late filings, reporting delays, or other non-fraudulent infractions. It will now result in monetary penalties rather than criminal prosecution. The shift reduces fear and risk for genuine participants in insolvency, encourages prompt compliance, and focuses the Code’s criminal liability on willful misconduct or fraudulent acts, streamlining the process for both debtors and professionals.
Resolution plans now involve sale of assets and not mergers, and demerger alone: Resolution plans can involve the sale of assets, business transfers, and other commercial actions, not just amalgamation, mergers or demergers. This clarification reflects the commercial realities on the ground, ensuring that insolvency solutions are not artificially restricted by narrow statutory interpretations.
Overall, the IBC Amendment Bill 2025 is a robust statutory response to the IBC's most troublesome pain points. By directly referencing and amending the relevant sections, the changes move the law towards greater clarity, creditor empowerment, and international alignment.
Ultimately, diligent implementation and tribunal modernization will decide the fate these reforms.
Nitin Jain is a partner at Agama Law Associates.
Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.
