• 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.
https://www.newsonair.gov.in/lok-sabha-passes-insolvency-and-bankruptcy-code-amendment-bill-to-address-interpretational-issues-among-stakeholders/
