Introduction
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 has introduced a significant change to the liquidation framework under the Insolvency and Bankruptcy Code, 2016 (“IBC”). Section 33(1A), creating an opportunity to restore the Corporate Insolvency Resolution Process (“CIRP”). This amendment came into force on May 26, 2026. The provision introduces a limited opportunity to revive the CIRP before a corporate debtor enters liquidation. Further, the provision has been supplemented by Regulation 40F of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”), which sets out the procedural framework for restoration of the CIRP.
Decoding the Provision
Section 33(1A) creates a limited statutory window between failure of CIRP and commencement of liquidation. The provision allows the resolution process to be restored for a period of 120 days on the failure of CIRP to rescue a financially stressed company, if the same is approved by the Committee of Creditors (“CoC”) with a 66% approval. Prior to this amendment, if the conditions under Section 33(1), namely where no resolution plan was received within the CIRP timeline or where the plan submitted was rejected by the Adjudicating Authority under Section 31, were met, liquidation was the natural consequence. The new provision alters this position by requiring the Adjudicating Authority to first consider an application by the CoC for restoration of the CIRP. Section 33(1A) states,
“(1A) Notwithstanding anything contained in sub-section (1), where the Adjudicating Authority is satisfied that the grounds mentioned in clause (a) or clause (b) of sub-section (1) of this section exist, it shall, before passing the liquidation order, consider an application made by the committee of creditors, in such manner and subject to such conditions as may be specified, by not less than sixty-six per cent. of the voting share, for restoring the corporate insolvency resolution process, and after considering such application, it may, by an order…”
The provision details that if the ground for liquidation is non-receipt of a resolution plan, the CIRP may be restored for completion within a period not exceeding 120 days. Likewise, if the ground for liquidation is rejection of a resolution plan under Section 31, the process may be restored to the stage of invitation for submission of a resolution plan, again subject to a maximum period of 120 days.
Importantly, the Explanation gives the provision a limited retrospective application by making it applicable even to CIRPs commenced before the 2026 amendment, as long as a liquidation order has not already been passed. Thus, the provision operates as a final rescue window, but not as an automatic extension or a right available to every stakeholder.
The procedural adoption of the section has been incorporated through Regulation 40F of the CIRP Regulations. It clarifies that the Resolution Professional (“RP”) is authorized to file the application on behalf of the CoC under Section 33(1A) of IBC.
Implications of a Second Chance of Revival
Section 33(1A) assumes significance as it introduces a statutory mechanism to defer liquidation in cases where the Corporate Debtor may still possess resolution value. The provision is aligned with the underlying objective of the IBC, which prioritizes resolution of the Corporate Debtor as a going concern over liquidation.
In Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, [1] the Supreme Court recognised that, in appropriate circumstances, where only a limited period is required to complete the CIRP and where continuation of the process would serve the interests of stakeholders, extension beyond the prescribed timeline may be justified, particularly where delay is attributable to adjudicatory processes rather than the conduct of the parties.
The Select Committee Report for the Insolvency and Bankruptcy (Amendment) Bill, 2025, discussed the legislative intent behind insertion of the provision as providing a “final opportunity” for revival before liquidation to the Corporate Debtor. The intent is to preserve value and avoid premature liquidation while keeping the process disciplined through a one-time restoration and a strict 120-day timeline. Accordingly, Section 33(1A) gives statutory expression to the IBC’s core preference for resolution over liquidation, a principle also underscored by the Supreme Court in the Essar Steel judgment.
From a practical standpoint, Section 33(1A) can be utilized as an important tool for revival, where liquidation would lead to avoidable value erosion despite the presence of credible resolution prospects. This may include cases involving regulatory delay, pending investigative proceedings, implementation hurdles or procedural impediments which prevent completion of CIRP within the original timeline. The provision therefore operates as a controlled statutory safeguard against premature liquidation, subject to CoC approval, satisfaction of the Adjudicating Authority and the maximum period of 120 days.
Hurdles to Cross
Despite its utility, Section 33(1A) is not free from ambiguity. The provision uses both “shall” and “may”. The Adjudicating Authority shall consider the CoC’s application before passing a liquidation order, but it may restore CIRP. This means that even after a 66% CoC vote in favour of restoration, the NCLT is not bound to allow restoration.
The Supreme Court has repeatedly held that the commercial wisdom of the CoC is generally not open to judicial interference, except on limited statutory grounds. However, unlike Section 31 read with Section 30(2), Section 33(1A) does not prescribe clear substantive parameters for judicial review.
Regulation 40F also largely prescribes procedural requirements. It requires reasons and timelines, but does not state what degree of investor interest, change in circumstances, or value improvement must be shown. As a result, different NCLT benches may adopt different thresholds while considering restoration applications.
Practical Applicability
The early application of Section 33(1A) has already been considered by the NCLT Hyderabad in Prasad Seeds Pvt. Ltd. v. Madasa Kumar, RP of Vibha Agrotech Ltd. & Anr., [2] The Tribunal observed that the legislative intent behind Section 33(1A) appears to be to provide an additional opportunity to the CoC to explore resolution even after expiry of CIRP by granting a further period not exceeding 120 days. However, the application in that case was not made by the CoC and there was no CoC resolution approving restoration with the requisite voting share. Accordingly, the Tribunal declined to direct restoration. The Hon’ble Tribunal held that the provision does not allow any person other than the CoC to file an application under Section 33(1A). Further, the order clarifies that Section 33(1A) is a CoC-driven mechanism. A resolution applicant may indicate willingness to submit or improve a plan, but it cannot independently compel restoration of CIRP. The commercial decision to seek restoration must come from the CoC.
Though the order does not prescribe the substantive grounds for adjudication under Section 33(1A), it does open the floodgates of future restoration and revivals of CIRP just before the liquidation is ordered.
Conclusion
Section 33(1A) is a significant and welcome addition to the IBC framework. It creates a final window to preserve enterprise value and avert liquidation where revival remains commercially feasible. By enhancing the possibility of better recoveries for creditors, it strengthens the case for rescuing the corporate debtor rather than consigning it to liquidation. In doing so, the amendment reinforces the IBC’s clear preference for resolution over liquidation and furthers its overarching objective of value maximization.
References:
- Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, (2020) 8 SCC 531.
- Prasad Seeds Pvt. Ltd. v. Madasa Kumar, RP of Vibha Agrotech Ltd. & Anr., IA (IBC) 771/2026., Ord dt. 22nd May 2026.
Authors:
Aniketh Nair, Associate Partner
Aditi Singh, Associate
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.