Creditor-Led Resolution: How The IBC Amendment Bill (2025) Speeds Up Insolvency

Policy Update
Sruti Halder

Background

The Insolvency and Bankruptcy Code (IBC), 2016 established a time-bound framework for resolving corporate insolvency through the National Company Law Tribunal (NCLT), the Insolvency and Bankruptcy Board of India (IBBI), and licensed Insolvency Professionals. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 was introduced in the Lok Sabha on 12 August 2025 and referred the same day to a Select Committee chaired by Shri Baijayant Panda. The Committee submitted its report on 17 December 2025, broadly endorsing the proposed amendments while recommending refinements.

The policy rationale is reinforced by the Economic Survey 2025–26, which identifies an efficient insolvency framework as central to financial-sector reforms by strengthening credit discipline, improving capital allocation, and supporting banking-sector stability. Similarly, the 28th Parliamentary Standing Committee on Finance, in its review of the Code, acknowledged the IBC’s contribution to improving India’s business climate while expressing concern over excessive haircuts and prolonged delays that erode asset value.

The Bill was subsequently passed by the Lok Sabha on 30 March 2026, the Rajya Sabha on 1 April 2026, and received Presidential assent on 6 April 2026, becoming the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026). Its provisions will come into effect on dates notified separately by the Central Government.

According to PRS Legislative Research, the Amendment introduces a Creditor-Initiated Insolvency Resolution Process (CIIRP) as an out-of-court alternative for specified financial institutions, allowing the debtor’s board to remain in control under creditor and NCLT oversight. Other key provisions include mandatory admission of financial-creditor applications within 14 days, greater authority for the Committee of Creditors (CoC) during liquidation, enabling provisions for group and cross-border insolvency, inclusion of guarantors’ assets in resolution with CoC approval, and penalties ranging from ₹1 lakh to ₹2 crore for frivolous or vexatious applications before the NCLT and Debt Recovery Tribunals.

Functioning

Once notified, the amended insolvency framework will operate through two parallel mechanisms. Under the existing Corporate Insolvency Resolution Process (CIRP), creditors or debtors initiate proceedings before the NCLT, following which a moratorium is imposed, an Insolvency Professional is appointed, the Committee of Creditors is constituted, and a resolution plan approved by at least 66 percent of the CoC is submitted to the NCLT. In the absence of an approved plan, the corporate debtor proceeds to liquidation.

The newly introduced CIIRP shifts the initial resolution process outside the court system for notified financial creditors. Unlike CIRP, the debtor’s board continues to manage the company while creditors supervise the process, with the NCLT intervening only at specified stages. This approach seeks to reduce judicial delays while preserving commercial autonomy for creditors

The creditor-led resolution process under the CIIRP framework is expected to be more effective than the existing debtor-driven approach because it places decision-making authority with financial creditors, who have the greatest financial stake in the outcome and are better positioned to assess the viability of the distressed borrower. By empowering creditors to initiate and steer the resolution process, CIIRP seeks to reduce delays, discourage strategic defaults, improve transparency, and maximize value for all stakeholders. This shift is intended to facilitate quicker resolutions, enhance recovery rates, and preserve economically viable businesses, thereby addressing many of the inefficiencies observed under the existing insolvency framework.

Regulatory developments during October–December 2025 indicate that the institutional framework was already adapting in anticipation of the amendment. The IBBI notified the Sixth and Seventh Amendment Regulations, 2025, requiring resolution plans to disclose beneficial ownership and include eligibility affidavits under Section 32A. In addition, a joint circular issued with the Enforcement Directorate established a standardised mechanism for Insolvency Professionals to seek restitution of assets attached under the Prevention of Money Laundering Act (PMLA), addressing a recurring obstacle in insolvency proceedings.

To strengthen implementation, the IBBI also constituted an Expert Committee chaired by Dr. Bhushan Kumar Sinha to review valuation practices. The Committee recommended standardised valuation report formats, harmonised valuation standards across insolvency processes, and the appointment of a Coordinator Valuer to determine enterprise-level fair value. Complementing these reforms, the Ministry of Corporate Affairs (MCA) notes in its Annual Report 2024–25 that digitisation, enhanced regulatory oversight, and improved coordination among insolvency professionals, creditors, and adjudicating authorities are intended to reduce procedural bottlenecks and improve transparency. The Standing Committee on Finance further recommended expanding NCLT and NCLAT capacity and operationalising an Integrated Technology Platform (iPIE) to strengthen case management.

Performance

All figures in this section are drawn from the IBBI Quarterly Newsletter, Vol. 37 (October–December 2025) and represent the position as of 31 December 2025. Since the substantive provisions of the Amendment Act were not yet in force during the reporting period, these figures establish the pre-amendment baseline against which future performance should be evaluated rather than measuring the Act’s impact.

Table 1: Status of CIRP Cases, as on 31 December 2025

Status of CIRPs	Number
Admitted	8,833
Total Closure	6,954
— Withdrawn under Section 12A	1,260
— Closed on appeal/review/settled	1,366
— Resolution plans approved	1,376
— Liquidation orders passed	2,952
Ongoing CIRP cases	1,879

Source: IBBI Quarterly Newsletter, Vol. 37 (October–December 2025), Table 1, Section C.1, p.8.

Table 2: Outcome of CIRPs by Initiating Stakeholder, as on 31 December 2025

Metric	Financial Creditors	Operational Creditors	Corporate Debtors	Overall
Realisation as % of Admitted Claims	31.93%	25.53%	18.01%	31.63%
Realisation as % of Liquidation Value	186.03%	149.32%	146.83%	171.54%
Average time for Closure of CIRP (days)	745	751	623	739
Average time for order of Liquidation (days)	533	539	452	527

Source: IBBI Quarterly Newsletter, Vol. 37 (October–December 2025), Table 2, Section C.2, p.9.

The overall recovery rate declined marginally across the three latest reporting periods, from 32.76% at the end of FY 2024–25 to 31.63% by December 2025. However, recoveries amounted to 94.95% of the estimated fair value of assets in resolved cases, suggesting that lower recoveries against admitted claims primarily reflect historically inflated claims rather than significant erosion of enterprise value.

Table 3: Timeline Distribution of Ongoing CIRPs, as on 31 December 2025

Time Elapsed Since Admission	Share of Ongoing Cases
≤ 90 days	9%
> 90 ≤ 180 days	7%
> 180 ≤ 270 days	8%
> 270 days	76%

Source: IBBI Quarterly Newsletter, Vol. 37 (October–December 2025), Figure 7, Section C.3.2, p.10.

Table 4: Sectoral Distribution of CIRPs at Admission, as on 31 December 2025

Sector	Share of Admissions
Manufacturing	37%
Real Estate	22%
Construction	12%
Wholesale & Retail Trade	10%
Electricity	2%
Hotels	2%
Others (including transport)	15%

Source: IBBI Quarterly Newsletter, Vol. 37 (October–December 2025), Figure 3, Section C.1, p.8.

Among companies that completed liquidation, claims of ₹4.50 lakh crore were backed by assets valued at only ₹0.18 lakh crore upon entering liquidation, resulting in recoveries equal to 91.36% of liquidation value. This metric should be interpreted separately from recoveries achieved through successful resolution plans.

The Economic Survey 2025–26 recognises the IBC as a major structural financial-sector reform but notes that its effectiveness depends upon timely adjudication and institutional capacity. This aligns with the 28th Parliamentary Standing Committee on Finance, which identifies tribunal capacity and administrative efficiency as critical determinants of successful insolvency resolution. Accordingly, the pre-amendment data primarily reflect implementation constraints rather than shortcomings in the legislative design of the Code.

Impact

The Amendment Act seeks to address the long-standing challenges of delayed resolution and value erosion by strengthening creditor-led insolvency and reducing procedural bottlenecks. However, as the substantive provisions were not in force during the reporting period, the available data represent a pre-amendment baseline rather than evidence of the Act’s effectiveness.

The baseline indicators suggest considerable room for improvement. Nearly three-quarters of ongoing CIRPs had already exceeded 270 days, while recovery against admitted claims declined marginally from 32.76% at the end of FY 2024–25 to 31.63% by December 2025. These trends reflect the implementation challenges the Amendment seeks to address rather than its outcomes.

A more positive finding is that resolution plans continue to preserve significantly greater value than liquidation. Creditors realised 171.54% of liquidation value under approved resolution plans and 94.95% of estimated fair value, indicating that viable businesses continue to generate substantially higher economic value through restructuring than through liquidation. This supports the Code’s fundamental objective of prioritising business rescue wherever feasible.

Beyond insolvency resolution, the Economic Survey 2025–26 emphasises that an efficient insolvency framework improves financial intermediation by enabling capital locked in distressed firms to be reallocated to productive sectors of the economy. Faster resolution also contributes to healthier bank balance sheets, improved credit discipline, and greater investor confidence by strengthening certainty around debt enforcement.

Similarly, the Ministry of Corporate Affairs Annual Report 2024–25 identifies the insolvency framework as an important component of India’s Ease of Doing Business reforms. Although measurable post-implementation outcomes of the Amendment Act are not yet available, the legislative changes are expected to improve procedural efficiency, preserve enterprise value and strengthen commercial certainty. Their actual impact should be assessed through future post-notification data on recovery rates, resolution timelines, restructuring outcomes and creditor recoveries.

Emerging Issues

The CIIRP framework limitations: The framework primarily focuses on financial creditors due to their greater exposure and role in lending decisions, excluding operational creditors from the analysis may overlook the broader impact of insolvency proceedings on other stakeholders. Operational creditors, particularly MSMEs and small suppliers, often depend heavily on timely payments from corporate borrowers for their working capital and business continuity. Delays or reduced recoveries during the insolvency resolution process can lead to liquidity constraints, disruptions in operations, and even financial distress for these smaller businesses.

Consequently, although this study concentrates on financial creditors, it is important to acknowledge that an effective insolvency framework should also balance the interests of operational creditors, as their financial stability contributes to the resilience of supply chains and the overall business ecosystem.

Tribunal capacity constraints: The 28th Parliamentary Standing Committee on Finance recommends filling vacancies, increasing NCLT and NCLAT benches and strengthening administrative support. Without these reforms, the Amendment’s mandatory 14-day admission timeline is unlikely to be met.

Conflicts with parallel enforcement laws: The IBBI’s circular on restitution of assets attached under the Prevention of Money Laundering Act (PMLA) indicates that coordination between insolvency proceedings and parallel enforcement mechanisms remains an unresolved implementation challenge.

Inconsistent valuation practices: The Expert Committee on Valuation identified significant variation in valuation reports, recommending standardised reporting formats, harmonised valuation standards and a Coordinator Valuer to reduce disputes and litigation.

Limited scope of CIIRP: Initially, the Creditor-Initiated Insolvency Resolution Process (CIIRP) is available only to notified categories of financial institutions, leaving operational creditors outside the fast-track mechanism despite their significant role in initiating insolvency proceedings.

Way Forward

Successful implementation of the Amendment Act will depend as much on institutional capacity as on legislative reform. Priority should therefore be given to implementing the Standing Committee’s recommendations by filling NCLT and NCLAT vacancies, expanding tribunal benches and operationalising the proposed Integrated Technology Platform (iPIE) to improve case management and reduce delays.

While the proposed Amendment introduces significant legal reforms aimed at strengthening the insolvency resolution framework, its success will ultimately depend on effective implementation by all stakeholders involved in the process. Timely and consistent decision-making by tribunals, the competence and independence of insolvency professionals, responsible participation by creditors, and robust oversight by regulators are all essential to achieving the intended objectives of faster resolutions, higher value maximization, and improved creditor confidence. Therefore, alongside legislative changes, institutional capacity, coordination, and efficient execution will play a crucial role in determining the overall effectiveness of the Amendment.

The recommendations of the Expert Committee on Valuation should also be implemented through standardised valuation formats, harmonised valuation standards and the Coordinator Valuer mechanism to improve transparency and reduce disputes during resolution.

Finally, once the CIIRP becomes operational, the Government and the IBBI should publish periodic implementation reviews identifying notified financial institutions, together with standardised post-amendment performance indicators. Such reporting would facilitate evidence-based policy evaluation and enable meaningful comparison between pre- and post-amendment outcomes in terms of recovery rates, resolution timelines and enterprise value preservation.

References

Insolvency and Bankruptcy Board of India. Insolvency and Bankruptcy News: The Quarterly Newsletter of the Insolvency and Bankruptcy Board of India, October–December 2025, Vol. 37. https://ibbi.gov.in/uploads/publication/02a71d3bab061af910f1488121c8fea1.pdf
PRS Legislative Research. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025. Bill Track. Available at: https://prsindia.org/billtrack/the-insolvency-and-bankruptcy-code-amendment-bill-2025
Report of the Select Committee on the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, presented to the Lok Sabha on 17 December 2025. Available at: https://prsindia.org (Summary).
28th Report of the Parliamentary Standing Committee on Finance. Review of Working of Insolvency and Bankruptcy Code and Emerging Issues, presented on 2 December 2025. Available at: https://prsindia.org
Report of the Expert Committee to Suggest Policy Changes for Valuations under the Insolvency and Bankruptcy Code, 2016, chaired by Dr. Bhushan Kumar Sinha, submitted on 4 November 2025. Available through the IBBI Reports Repository: https://ibbi.gov.in/resources/reports
Government of India. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026). Gazette of India Notification, 6 April 2026. Available at: https://egazette.nic.in
Government of India. Economic Survey 2025–26. Ministry of Finance, Department of Economic Affairs. Financial Sector Chapter. Available at: https://www.indiabudget.gov.in/economicsurvey/
Ministry of Corporate Affairs. Annual Report 2024–25. Government of India. Available at: https://www.mca.gov.in/content/mca/global/en/reports-and-publications/annual-reports.html
Reserve Bank of India. Financial Stability Report, June 2025. Reserve Bank of India. Available at: https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=1305
Ministry of Corporate Affairs. Official Website. Government of India. Available at: https://www.mca.gov.in/

About the Contributor

Sruti Halder is pursuing an MSc in Economics at the Gokhale Institute of Politics and Economics. She is committed to leveraging data-driven research and evidence-based policymaking to promote inclusive and sustainable socio-economic development.

Acknowledgement

The author expresses sincere gratitude to IMPRI (Impact and Policy Research Institute) for providing me with the opportunity to prepare this policy update article and for fostering a rigorous learning environment that connects research with public policy practice. I’m grateful to Rashi Kothari and Pallavi Lad for reviewing my article, which has improved the quality of the policy update.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.