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The government has introduced the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, in the Lok Sabha, proposing sweeping reforms to improve the efficiency of the insolvency process. The bill, which has been referred to a select committee of Parliament for review, aims to cut down on delays, protect stakeholders, and enhance governance. It includes new provisions for group insolvency and an out-of-court resolution process, seeking to address a current case backlog and bring India's insolvency framework in line with global standards.
In a significant move to overhaul the country's insolvency regime, Union Finance Minister Smt Nirmala Sitharaman on August 12, 2025, introduced the Insolvency and Bankruptcy Code (IBC) Amendment Bill in the Lok Sabha. The bill, the seventh amendment to the IBC since its inception, aims to address widespread delays and shortcomings that have plagued the process. It has now been referred to a select committee of Parliament, which will submit its report in the next session. Advertisement
The proposed modifications include a provision to make it mandatory to admit an insolvency application from a financial creditor once a default has been proven and procedural requirements are met. This is a direct response to the delays at the admission stage, where cases are taking an average of 434 days to be admitted, far exceeding the 14-day timeline. The bill also introduces a creditor-initiated insolvency resolution process (CIIRP), an out-of-court mechanism designed for faster and more cost-effective resolutions for genuine business failures.
The new bill also includes a group insolvency framework to handle complex corporate structures in a coordinated manner, which is expected to minimize value erosion from fragmented proceedings. Another key proposal is a cross-border insolvency framework, which aims to protect stakeholder interests in both domestic and foreign proceedings and aligns India's law with international best practices.
The IBC was introduced in 2016 to rescue and reorganize distressed companies in a time-bound manner, but its efficiency has been hindered by procedural delays and a high case backlog. The average time for insolvency resolution has increased to 716 days, well beyond the 270-day deadline. By addressing these issues, the government hopes to ease the burden on the judiciary, improve the ease of doing business, and ultimately strengthen India?s position as a business-friendly jurisdiction.
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