• On August 12, 2025, the Centre introduced the Insolvency and Bankruptcy Code (Amendment) Bill in the Lok Sabha, to address procedural delays and streamlining the resolution process for companies and individuals.
• The Bill was initially referred to a Select Committee. Bill has a total of 12 amendments to the IBC, including 11 recommended by the Select Committee and one introduced by the government.
• The Honorable Finance Minister Nirmala Sitharaman said the Insolvency and Bankruptcy Code (IBC) was never intended to function merely as a debt recovery mechanism but as a framework to rescue viable businesses, resolve financial stress and preserve enterprise value.
• She further said that the IBC has played a very crucial role in improving the health of the country's banking sector, including the recovery of more than 50% of their non-performing assets.
OUR VIEW:
The 2025 IBC Amendment Bill introduces a new form of Creditors' Initiated Insolvency Resolution Process (CIIRP), offering lenders more say in how to liquidate a business on the insolvency platform. As some analysts have described, this is a less adversarial mechanism to resolve legitimate business struggles since it offers creditors the right to initiate the process. In recent years, the IBC platform has often been drawn out. CIIRP may be initiated only by specified financial creditors. To initiate the process, at least 51 per cent of such creditors must agree (by value of debt). The Bill adds that NCLT must pass the order for liquidation within 30 days from the date of the application or intimation. It also specifies that liquidation proceedings must be completed in 180 days, extendable by up to 90 days. Under the Code, a company may apply for voluntary liquidation. The Bill specifies that voluntary liquidation proceedings must be completed within one year. The concern will now be how the Creditors Committee makes decisions and whether those will be subject to judicial review. There appears to be a shift toward assessing how fairly and transparently the resolution process operates, rather than merely whether a matter is accepted on its merits. These are welcome steps, as a high-profile tussle continues on the same issue between two industrial groups on the Jaiprakash Associates Limited case.
It would also be interesting to find out how Courts interpret and enforce the evolving standards for committee of creditors (CoC) decisions by dissident creditors, say on claims of unjust distribution. This means that all stakeholders need to change their perspective towards CIIRP from being just a speed improvement, and ensure that their processes are sufficiently robust to stand up to targeted judicial scrutiny under the legislation.
Remember that IBC has played a crucial role in improving the overall health of India’s banking sector. According to the RBI’s Financial Stability Report released in June 2025, Gross Non- Performing Assets of the banking system have significantly declined, reaching a multi-decadal low of 2.3% at the end of March.
Links: https://www.newsonair.gov.in/lok-sabha-passes-insolvency-and-bankruptcy-code-amendment-bill-to-address-interpretational-issues-among-stakeholders/
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