Centre Notifies Key IBC Amendment Provisions, Operationalises Creditor-Initiated Insolvency Resolution Process

The Centre has operationalised the new creditor-initiated insolvency resolution process (CIIRP), opening the door for specified financial creditors to directly trigger insolvency proceedings against eligible companies, after bringing key provisions of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 into force from May 26.

The notified provisions also reshape the liquidation framework, allow stalled insolvency resolution processes to be revived before a liquidation order is passed, lower voting thresholds for pre-pack insolvency, and impose tighter timelines on tribunals and insolvency processes.

The IBC (Amendment) Act, 2026 received Presidential assent on April 6. The law authorised the Central Government to notify different commencement dates for different provisions.

Among the changes now in force are amendments to core definitions and the insolvency admission framework (Sections 2–6). These include the introduction of definitions for registered valuer, service provider, avoidance transaction, and fraudulent or wrongful trading.

The Adjudicating Authority must now admit or reject insolvency applications within 14 days (Sections 4–6). Where that deadline is missed, reasons for the delay must be recorded in writing.

A major structural shift comes through the introduction of the CIIRP framework under Chapter IV-A (Section 40). Under this route, notified classes of financial institutions can initiate insolvency proceedings themselves by appointing a resolution professional, instead of first approaching the tribunal in the conventional manner.

That power is not unchecked. Creditors must first obtain approval from financial creditors in that notified class representing at least 51% in value of the debt. The corporate debtor must also be given a minimum 30-day window to make its representation.

The process is meant to conclude within 150 days. In specified situations, it can be extended once by up to 45 days.

Liquidation, too, sees a substantial reset (Sections 13, 21–23). The committee of creditors (CoC), whose role traditionally ended once liquidation began, will now continue to oversee the liquidator's conduct of the process.

The law also separates the roles of resolution professional and liquidator. A professional who handled the CIRP cannot be appointed as liquidator for the same corporate debtor (Section 21). Instead, the appointment will be made from names recommended by the Insolvency and Bankruptcy Board of India (IBBI).

If the CoC loses confidence in the liquidator, it can seek a replacement with a 66% voting threshold (Section 22).

Another notable change gives companies a narrow second chance. Even where grounds for liquidation exist, the corporate insolvency resolution process can be restored if no liquidation order has yet been passed (Section 20).

That restoration is available only once. The revived CIRP must conclude within 120 days.

The rules around withdrawal of insolvency proceedings have also been tightened (Section 8). Any withdrawal under Section 12A will now need approval from 90% of the CoC. It cannot happen before the CoC is constituted or after the first invitation for submission of a resolution plan.

The obligation to cooperate during insolvency proceedings has also been widened (Section 12). It now extends not just to current personnel, but also former personnel, promoters, people associated with management, and those engaged under service contracts.

Liquidators are now working against a compressed timeline as well (Section 33). The liquidation process must be completed and dissolution sought within 180 days, though tribunals may allow an extension of up to 90 days if sufficient reasons are shown.

Another procedural overhaul removes Sections 38 to 42 of the Code (Section 25), replacing the earlier framework dealing with submission, verification, admission, and determination of claims in liquidation.

Creditors, members, and partners also gain a direct remedy under the revised Section 47 (Section 28). If a liquidator or resolution professional fails to report preferential, undervalued, extortionate, or fraudulent transactions, they can now move the Adjudicating Authority themselves.

Financial creditors who vote against a resolution plan have also been given explicit statutory protection (Section 18). The amended distribution framework guarantees them at least the prescribed minimum payout.

The amendments also create a route for transfer of certain guarantor-linked assets during resolution (Section 17). This applies where a creditor has already taken possession of an asset by enforcing security interest against a personal or corporate guarantor, subject to the approvals laid down in law.

For pre-packaged insolvency resolution, the approval threshold for unrelated financial creditors has been reduced from 66% to 51% (Section 34). The lower threshold applies both to initiation of the process and appointment of the proposed resolution professional.

The Fast Track CIRP framework under Chapter IV has been removed altogether (Section 39).

The appellate process also comes under stricter timelines. Appeals before the National Company Law Appellate Tribunal (NCLAT) under Section 61 are now to be disposed of within three months (Section 43).

The notified provisions also brings to force stronger penalty provisions, including sanctions for frivolous proceedings, broader consequences for fraudulent and wrongful trading, and expanded enforcement powers for contraventions under the Code.

Click here to read the Insolvency and Bankruptcy Code (Amendment) Act, 2026