Lok Sabha Passes IBC Amendment Bill 2025, Proposes Creditor-Initiated Insolvency Process
Kirit Singhania
30 March 2026 3:38 PM IST
The Lok Sabha on Monday passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, bringing in a creditor-initiated insolvency resolution process and tightening timelines for admission and disposal of cases under the Code.
A new Chapter IV-A has been inserted to allow notified classes of financial creditors to set the process in motion without waiting for prior admission by the Adjudicating Authority.
This, however, is subject to approval of at least 51% in value of similarly placed creditors and prior notice to the corporate debtor, which must be given an opportunity to respond before the process moves forward.
Under the existing framework, insolvency proceedings begin only after the Adjudicating Authority admits an application. The new mechanism shifts that starting point. Creditors can now trigger the process through a public announcement once the statutory requirements are met, with the tribunal stepping in later where required.
The process itself is time-bound. It must be completed within 150 days, with a one-time extension of up to 45 days if 66% of the Committee of Creditors agrees.
Control of the company also works differently here. Unlike the standard corporate insolvency resolution process, the board of the corporate debtor continues to run the business, while the resolution professional oversees the process. A moratorium does not kick in automatically and has to be specifically sought.
There is also a built-in fallback. If a resolution plan is not approved within the stipulated period or other conditions are not met, the process can shift into a regular corporate insolvency resolution process.
On the procedural side, the Bill now requires adjudicating authorities to decide admission applications within 14 days and to record reasons in writing if that timeline is not met, reinforcing what was earlier treated as a flexible requirement.
The role of the Committee of Creditors has been pushed further into the liquidation stage. It will now supervise the liquidation process and can replace the liquidator with a 66% voting share, extending creditor control beyond the resolution phase.
Withdrawal of insolvency proceedings has been narrowed. It is no longer permitted either before the constitution of the Committee of Creditors or after the first invitation for resolution plans is issued.
The bill also makes it clear that proceedings involving avoidance transactions or fraudulent or wrongful trading will continue even after the resolution process or liquidation is completed.
Another change ensures continuity of licences, permits, and other regulatory approvals tied to a resolution plan. These will remain valid for their duration, provided the applicable conditions are met.
Separately, the fast-track insolvency framework has been dropped, with the new creditor-initiated route positioned as an alternative aimed at addressing delays that have persisted under the current system.