IBC Amendment Bill 2025

IBC Amendment Bill 2025

  • Context:

  • The Lok Sabha recently passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025.

  • Introduced to address procedural delays, interpretational ambiguities, and improve recovery outcomes, the Bill makes sweeping changes to the original 2016 Code.

  • Two of the most significant structural reforms include

  • The introduction of the Creditor-Initiated Insolvency Resolution Process (CIIRP)

  • A complete overhaul of the Committee of Creditors' (CoC) role during liquidation

  • Creditor-Initiated Insolvency Resolution Process (CIIRP):

  • Out-of-Court Commencement:

  • The Bill introduces CIIRP as a new, distinct mechanism allowing for the out-of-court initiation of insolvency proceedings by select financial institutions.

  • Approval Threshold:

  • To trigger this process, at least 51% of the specified financial creditors (measured by the value of their debt) must agree.

  • Unlike the standard Corporate Insolvency Resolution Process (CIRP), where the management of the distressed company immediately shifts to the CoC and a Resolution Professional, the CIIRP allows the debtor to remain in control of the company during the resolution process.

  • This is designed to facilitate faster, more cost-effective resolutions with minimal business disruption.

  • Revamping the Committee of Creditors (CoC) in Liquidation:

  • Removal of Liquidator's Quasi-Judicial Powers:

  • Previously, the Code granted the liquidator significant powers to admit or reject claims and determine their overall value.

  • The 2025 Amendment strips the liquidator of these specific powers.

  • Direct Supervision:

  • The Bill decisively shifts control back to the creditors.

  • It grants the CoC the explicit power to appoint or remove the liquidator and directly supervise the entire conduct of the liquidation process to ensure the protection of direct financial interests.

  • Statutory Dues:

  • The amendment formally clarifies that statutory dues (such as Central or State Government tax dues) do not hold the status of secured creditors, settling a long-standing legal dispute.

  • New Frameworks:

  • It explicitly empowers the central government to frame dedicated rules for complex scenarios, including group insolvency (handling the insolvency of corporate groups together) and cross-border insolvency proceedings.