Introduction

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (“Bill”) proposes the single biggest overhaul to the existing insolvency framework in India since the Insolvency and Bankruptcy Code, 2016 (“Code”) came into effect in December 2016. The Bill attempts to address various challenges that have arisen with the Code’s implementation and to clarify ambiguities and unintended consequences that have resulted from certain judicial decisions. These changes include amendments to streamline the corporate insolvency resolution process (“CIRP”), changes to provide for supervision of the liquidation process by the committee of creditors (“CoC”), clarifications on treatment of security interests in liquidation and changes to the framework for preferential, undervalued, fraudulent, and extortionate credit (“PUFE”) transactions. In addition, the Bill introduces new concepts such as the creditor-initiated insolvency resolution process (“CIIRP”), which provides an alternative process to the CIRP under the Code and enabling provisions for the Government to frame rules on group insolvency and cross border insolvency. These proposed amendments collectively aim to restore the Code’s core principles of clarity, speed, and commercial certainty, while adapting to the evolving requirements of creditors, insolvency professionals, and the broader financial ecosystem. The Bill, which was introduced in the Lok Sabha on August 12, 2025, has now been referred to a select committee of the Parliament for its consideration.

This note decodes the key amendments proposed by the Bill.

I. Corporate Insolvency Resolution Process

The proposed changes to the CIRP focus on enhancing efficiency, reducing judicial discretion, regulating withdrawal of admitted applications and clarifying the roles and responsibilities of key stakeholders.

1. Initiation of CIRP

Section 7 of the Code (initiation of CIRP by a financial creditor) is proposed to be amended to expressly specify the grounds on which the adjudicating authority i.e., the National Company Law Tribunal (“NCLT”) must admit or reject applications for initiation of CIRP by financial creditors. The proposed amendments bring about the following clarifications with respect to applications filed under Section 7 of the Code:

Removal of judicial examination and discretion in admitting/ dismissing applications: The proposed amendment provides three exhaustive grounds to be examined by the NCLT, which are: (i) the occurrence of a default; (ii) whether the application is complete in all respects; and (iii) that there are no pending disciplinary proceedings against the proposed resolution professional (“RP”). The proposed Explanation I to Section 7 also categorically provides that no grounds apart from these grounds shall be considered in admitting or rejecting an application.
This proposed amendment seeks to overcome the impact of the Supreme Court’s decision in Vidarbha Industries Power Limited v. Axis Bank Limited (July 12, 2022) where the Supreme Court held that the NCLT has the discretion to refuse to admit an application under Section 7 (despite the occurrence of a default), if there are other ‘good reasons’ made out by the corporate debtor. Relying on the use of the word ‘may’ in Section 7(5), the Supreme Court held that the provision is discretionary and not mandatory. The proposed amendment now seeks to remove all judicial discretion by mandating that, if the above grounds are satisfied, the NCLT ‘shall’ admit the application.
Information Utility (“IU”): The proposed amendments clarify that the record of default with an IU is sufficient to ascertain the existence of debt and default by the NCLT. This clarification is again intended to remove judicial discretion and speed up the admission process. This proposal emanates from the notice released by the Ministry of Corporate Affairs (“MCA”) titled “Invitation of comments from the public on changes being considered to the Insolvency and Bankruptcy Code, 2016” dated January 18, 2023 (“MCA Notice”), which highlighted the need for increasing reliance on the record submitted with the IU during the admission process. This was also reaffirmed and discussed in detail in the discussion paper released by the Insolvency and Bankruptcy Board of India (“IBBI”) titled “Strengthening the process of issuance of record of default by Information Utility” dated May 10, 2024.

Amendments have also been proposed to Section 9 of the Code (which empowers an operational creditor to file for commencement of CIRP) and Section 10 of the Code (which empowers the corporate debtor itself to file for commencement of CIRP) to ensure consistency with the requirement of recording reasons if the order of admission or rejection is not passed within 14 days. Section 215 of the Code (which provides the procedure for submission of financial information) is also proposed to be amended to require operational creditors to submit information to the IUs before filing an application under Section 9. Currently, this is not a mandatory requirement for operational creditors.

Another proposed amendment to Section 10 of the Code seeks to do away with the right of corporate debtors to nominate an interim resolution professional (“IRP”) in the application filed by them for initiating CIRP. A corresponding amendment is also proposed to Section 16 of the Code (which deals with appointment and tenure of the RP). Under the proposal, for any application filed by a corporate debtor for initiating CIRP, the NCLT will make a reference to the IBBI for a recommendation of an insolvency professional to act as an IRP. This proposal also stems from the MCA Notice, which clarifies that, to hold the trust and confidence of the CoC, an independent person should be appointed as an IRP to prevent the misuse of Section 10 of the Code.

2. Withdrawal of admitted applications

The Bill proposes to amend the framework for the process and timelines for withdrawal of admitted applications under Section 12A of the Code. Under the proposed amendment, an admitted application may only be withdrawn, on an application by the RP, after the CoC has been constituted, and with the consent of members of the CoC representing not less than 90% of the voting share. The proposed amendment also clarifies that no application for withdrawal shall be entertained after the first invitation for submission of a resolution plan has been issued, thereby limiting the overall time period during which admitted applications may be withdrawn.

The proposed amendments are a departure from the current position on withdrawal of CIRP applications. Section 12A (as it stands today) also contemplates withdrawal of an application only with the consent of the CoC. However, under Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) an application which is admitted can be withdrawn before the constitution of the CoC, by the applicant, through the IRP.

The proposed amendment is seemingly in response to the issue that arose in the Supreme Court’s decision in GLAS Trust Company LLC v. Byju Raveendran & Others (decided on October 23, 2024), where the Board of Control for Cricket in India tried to withdraw the CIRP application after it was admitted, but when the constitution of the CoC was stayed. Despite the appellant’s reliance on Regulation 30A of the CIRP Regulations, the Supreme Court held that any application to withdraw an admitted CIRP would require the support of 90% of the CoC.

The proposed amendment clarifying the outer time limit for withdrawing an admitted application appears to be in response to the decision of the Supreme Court in Brilliant Alloys Private Limited v. Mr. S Rajagopal & Others (decided on December 14, 2018) where the Supreme Court viewed the restriction in Regulation 30A of the CIRP Regulations on withdrawing applications after the issuance of expression of interest (without an explanation), as a directory provision.

Together, the proposed changes to Section 12A emphasize that the CIRP is a collective process and an application, once admitted, can only be withdrawn during a limited time period and with the consensus of 90% of the CoC.

3. Cooperation with the IRP

Section 19 of the Code (as it stands today) mandates that the personnel of the corporate debtor shall cooperate with the IRP or RP and provide them with all necessary information / documents. The proposed amendments to Section 19 expand the scope of its application to all such ‘persons who are or have been personnel of the corporate debtor’ and to service providers of the corporate debtor, implying that any past employee of the corporate debtor and any persons with a contractual relationship with the corporate debtor may also be required to provide necessary cooperation to the IRP and RP. In the past, the NCLT has on a case-by-case basis (including in the following decisions) extended the scope of the personnel who are required to cooperate with the RP and IRP:

Sarthak Gupta & Dolly Gupta v. MLP Developers and Promoters Pvt. Limited (decided on July 5, 2023), which held that the statutory auditor of the corporate debtor is also under an obligation under Section 19 of the Code to furnish all the required documents/information, as may be required by the RP.
Pritam Bayal, RP v. NIT Global Data Centers & Cloud Infrastructure India Private Limited (decided on September 19, 2023), which inter alia observed that a service provider of a corporate debtor should cooperate with the RP under Section 19 of the Code.

4. Assets of a guarantor

The Bill proposes to introduce a new Section 28A to the Code, which would enable a creditor, who holds a security interest over a guarantor’s asset and has taken possession of such asset under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”), or any other law, to permit the transfer of that asset as part of the corporate debtor’s CIRP, provided the approval of the CoC is obtained. In cases where the guarantor is also undergoing insolvency or bankruptcy proceedings, approval from the guarantor’s own creditors would additionally be required. The proceeds from the sale of such an asset would first be applied towards settling the guarantor’s debt, after accounting for the relevant costs, and any remaining surplus would be returned to the guarantor or included in its insolvency or liquidation estate, as appropriate.

This is a significant change that allows the assets of the guarantor to be part of the corporate debtor’s CIRP, provided that one or more creditors of the corporate debtor have the power to transfer the asset under applicable law (such as the SARFAESI Act). While such a provision may be helpful in certain specific cases to maximize value for the creditors and enable a viable resolution plan, it could also lead to complications during the CIRP, particularly if the guarantor is not in CIRP and has creditors who do not overlap with the corporate debtor’s creditors. It remains to be seen how this would be implemented in practice.

5. Resolution plan and the CoC

Contents of the resolution plan

Section 30 of the Code (as it stands today) requires financial creditors who do not vote in favor of the resolution plan to be paid at least the liquidation value i.e. the amount which would be payable to them under Section 53 in case of liquidation of the corporate debtor.

The proposed amendments to Section 30 of the Code provide that dissenting financial creditors must be paid at least the lower of:

the amount due to them in liquidation (under Section 53), or,
the amount they would have received if the amount to be distributed under the resolution plan was distributed in the order of priority under Section 53.

Therefore, if the amount payable to dissenting financial creditors under the second scenario is lower than that of the first scenario (i.e., the liquidation value), then the amount under the second scenario shall serve as the minimum that must be paid to them for the resolution plan to be in compliance with law. This ensures that the requirement to provide at least a minimum amount to dissenting financial creditors does not obstruct the approval of a feasible and viable resolution plan. Interestingly, these proposed amendments would not apply retroactively, i.e., if the CoC has already approved a plan, resolved to liquidate, or a liquidation order has been passed before the commencement of the amendment, the existing provisions would apply.

The proposed amendment to clause (d) of Section 30 also specifies that the resolution plan must provide not only for implementation and supervision of the plan but shall also require the constitution of a dedicated monitoring committee to oversee the plan’s implementation, as prescribed by the IBBI (in line with discussion paper released by IBBI titled “Discussion Paper Monitoring Committee Under CIRP” dated November 19, 2024). It is notable that Regulation 38 of the CIRP Regulations was amended in 2023 to authorize the CoC to assess the need for a monitoring committee to oversee the implementation of the resolution plan. If deemed necessary, the CoC was empowered to decide on establishment of such a committee at the time of approving the resolution plan. The proposed amendment makes the requirement to constitute a monitoring committee mandatory, rather than leaving it to the discretion of the CoC.

Approval of resolution plan

Section 31 of the Code, which deals with approval of resolution plans, is proposed to be revamped under the Bill. The proposed amendments in relation to Section 31 of the Code are as set out below:

The NCLT may, on an application by the RP (with approval from 66% of the CoC), first approve only the implementation of the resolution plan, and subsequently approve the manner of distribution under that plan within 30 days from the date of approval of implementation of such resolution plan. The proposed amendment, thus, introduces a staggered approval mechanism, where implementation of the business revival components of a plan can commence without awaiting finality on the distribution waterfall. This proposal appears to be a reaction to situations where approval of the resolution plan has been delayed because of various stakeholders contesting their claims. This issue has also been discussed in detail in the discussion paper released by the IBBI titled “Streamlining Processes under the Code: Reforms for Enhanced Efficiency and Outcomes” dated February 4, 2025. However, it is unclear if the CoC would be comfortable approving a resolution plan without the manner of distribution being agreed to and what the consequences would be if the manner of distribution is not approved within 30 days of the approval of implementation of the resolution plan.
Before rejecting any resolution plans, the NCLT will be required to issue a notice to the CoC to rectify defects in the plan, thereby ensuring procedural fairness by providing an opportunity to the CoC and the successful applicant to address minor gaps or technicalities, minimizing frivolous rejections and promoting efficient resolution.
The NCLT would be mandated to approve or reject a resolution plan within 30 days of its receipt, failing which it would have to record written reasons for any delay.
Where a resolution plan involves a ‘combination’ (as defined under the Competition Act, 2022), the approval from the Competition Commission of India (“CCI”) must be obtained before the plan is submitted to the NCLT rather than before approval from the CoC, as is currently required. This proposed amendment is intended to provide greater flexibility in the resolution process and is a direct response to the Supreme Court’s decision in Independent Sugar Corporation Ltd v. Girish Sriram Juneja, (decided on January 29, 2025) where the Supreme Court set aside the resolution plan as CCI approval was obtained after the plan had been approved by the CoC.
Licenses, permits, and other similar governmental authorizations will not be suspended/terminated prior to their stated expiration so long as the obligations under such authorizations are met post-resolution plan approval, thereby addressing practical issues with business continuity and assuring acquirers and stakeholders that governmental approvals necessary for operations are protected.
Upon approval of a resolution plan, all claims against the corporate debtor and its assets, under any law and arising prior to approval, shall be extinguished unless otherwise provided in the plan. In addition, no further proceedings or assessments can be brought in respect of such claims in order to provide a clean slate for incoming resolution applicants. This proposed amendment is a reaction to a line of cases including the Supreme Court’s decision in CoC of Essar Steel India Limited v. Satish Kumar Gupta & Others (decided on November 15, 2019), which emphasized the clean slate theory.
Clear explanations to Section 31(6) are proposed to be inserted that state that under the clean slate theory, the concept of extinguishment does not apply to claims/proceedings against past promoters, management, or personal guarantors. Also, if a third party with joint/joint and several liability pays a creditor after the plan, their rights of indemnity against the corporate debtor are also extinguished.

6. Powers and duties of a resolution professional

The Bill also proposes amendments in relation to the powers and duties of the RP. The proposed amendments to Section 18 of the Code (duties of the IRP) permit the IRP to not just receive, collate and consolidate, but also verify the claims received from stakeholders. The proposed amendments to this section also empower the IBBI to prescribe the manner in which the IRP should receive, verify and collate the claims submitted by the creditors. Further, the proposed amendment to Section 25 of the Code (duties of the RP) imposes express obligations on the RP to bring not only avoidance transactions but also fraudulent and wrongful trading transactions to the attention of the NCLT, remedying previously unclear obligations.

II. Liquidation

Several changes have been proposed to the liquidation process under the Code, to streamline the process and remove bottlenecks that have been identified over the course of time. Two substantive proposals are that the moratorium under Section 14 of the Code (which is currently applicable only during the CIRP) is to be made applicable to the liquidation process, and the CoC is to be given a supervisory role during liquidation. Some sections have been done away with to prevent duplication of processes which take place during the CIRP and to further streamline the process of liquidation.

1. Applicability of moratorium to liquidation

The moratorium under Section 14 of the Code has been proposed to be extended to liquidation, to reduce the burden on resources, limit delays, and reduce the administrative burden on the liquidator during the liquidation process. This appears to be a response to instances where liquidators get involved in several legal proceedings on behalf of the corporate debtor during the liquidation process, many of which are unrelated to the insolvency of the corporate debtor. In addition to diverting attention from the liquidator’s primary responsibilities, such proceedings also typically delay the liquidation process.

2. Streamlining the liquidation process

Timeline-based changes have been proposed to various stages of the liquidation process, such as the introduction of a timeline of thirty (30) days under Section 33 of the Code for the NCLT to pass a liquidation order, and a timeline of one (1) year for voluntary liquidation under Section 59 of the Code. Similar to the amendments to Section 19 discussed above, the extension of cooperation by personnel of the corporate debtor during liquidation has been expanded to include even past employees and service providers of the corporate debtor under the proposed amendment to Section 34. Further, since the Bill proposes that the RP be granted the powers to receive, verify, consolidate and value claims under its proposed amendments to Section 18, in order to prevent duplication of the processes, Sections 38 to 42 of the Code (dealing with consolidation, verification, admission or rejection, valuation, and appeal of claims during the liquidation process) are proposed to be deleted.

3. CoC’s role during liquidation

A significant structural change proposed in the Bill is to Section 33 of the Code (dealing with initiation of liquidation) to confer the CoC with supervisory powers over the liquidation process. Currently, the liquidation process is to be carried out by the liquidator in consultation with the stakeholders’ committee that consists not just of financial creditors, but also of other creditors, as well as the erstwhile promoters of the corporate debtor. The Bill proposes to do away with the stakeholders’ committee and provide the CoC with direct supervisory authority over the liquidation.

Under the proposed amendments, the RP is no longer automatically appointed as liquidator. Instead, the liquidator is to be appointed on the proposal of the CoC. Through the proposed introduction of Section 34A, the CoC can also replace the liquidator, after a vote of not less than 66% of the voting share and written consent from the proposed liquidator. It is also clarified that the new provisions will apply to all liquidation processes commenced after the enactment of the Bill and to ongoing liquidations where an application for dissolution under Section 54 of the Code has not yet been filed. These proposed amendments mark a pivotal shift in ensuring that the liquidation process is also creditor driven. However, the Bill does not provide details of the manner of the CoC’s supervision over the liquidator, which may be subsequently specified by the IBBI through regulations.

4. NCLT’s authority to reinstate CIRP

Section 33 of the Code (as it stands today), mandates the NCLT to pass an order requiring the corporate debtor to undergo liquidation in case of a contravention of an approved resolution plan, or a resolution plan not being received within the specified time period. The proposed amendment to Section 33 of the Code (by insertion of a new provision i.e., Section 33(1A)) empowers the NCLT to reinstate the CIRP on an application made by the CoC to that effect, even if conditions that would otherwise mandate the passing of a liquidation order exist. This proposal seeks to maximize the value of the corporate debtor, by allowing CIRP to be reinstated wherever doing so may be in the commercial interests of the stakeholders. While certain guardrails have been placed around reinstatement of the CIRP, including that it has to be completed within 120 days and that a CIRP can be restored only once, it remains to be seen if this provision may result in further delays or a reluctance of the NCLT to pass liquidation orders.

5. Early dissolution of the corporate debtor

Consistent with the above proposed amendment which permits the CIRP to be reinstated, another proposed amendment to Section 33 of the Code empowers the CoC to move the NCLT for early dissolution of the corporate debtor in cases where the CoC in its commercial wisdom determines that there would be no commercial benefit to reviving the corporate debtor. An application for early dissolution may be made during the subsistence of the CIRP, but before the resolution plan has been approved. A corresponding amendment is proposed to the liquidation process with the introduction of Section 54 (2A) to provide the CoC with the right to move the NCLT for immediate dissolution of the corporate debtor, thereby bypassing the liquidation process.

6. Changes in relation to security interest

a. Definition of ‘security interest’

Amendments have been proposed to the definition of ‘security interest’ under Section 3(31) of the Code. An explanation to this provision is proposed to be inserted to clarify that the term ‘security interest’ shall only include agreements or arrangements between two or more parties and excludes any security interest created by virtue of provisions in central or state law. This clarification is especially important in light of the decision of the Supreme Court in State Tax Officer v. Rainbow Papers Limited, (decided on September 6, 2022 )(“Rainbow Papers”), where the Supreme Court had recognized government authorities as secured creditors owing to a lien created by operation of law over statutory dues. The proposed amendment clarifies the position of law and exclude liens created by operation of law from the definition of security interest under the Code. This clarification will ensure that there is no ambiguity on the status of government dues in the distribution waterfall under Section 53 of the Code.

b. Multiple secured creditors

The Bill proposes an amendment to Section 52 of the Code (which deals with secured creditor in liquidation proceedings) to address the situation where more than one creditor has competing security interests over an asset of the corporate debtor. The proposed amendment provides that a secured creditor may choose to realize its security interest only with the approval of secured creditors who collectively hold not less than 66% in value of the claims secured by such shared security. This proposal is helpful as it brings about much needed clarity for the treatment of shared security during liquidation. Amendments have also been proposed to allow for costs incurred during the insolvency resolution process and liquidation process, and for workmen’s dues, to be deducted from the proceeds of realization of the security interest.

c. Security interest and waterfall

The proposed amendment inserts an explanation to Section 53 of the Code (which deals with distribution of assets on liquidation) to clarify that a secured creditor will be considered as such, only to the extent of the value of its security interest, and for any remaining debt, it shall be considered an unsecured creditor for the purposes of liquidation. This is a critical clarification that will ensure that creditors are correctly classified based on the extent to which their claims are secured by a security interest.

Further, the proposed amendment to Section 53 introduces a change in the priority of central and state government dues for a period beyond two years preceding the liquidation commencement date. For dues in the two years preceding liquidation, the priority remains as per the existing provision. Beyond the two-year period, the government dues fall lower in priority as ‘any remaining debts and dues’ under Section 53(1)(f) of the Code. A similar change has also been made to Section 178 of the Code, dealing with bankruptcy.

In addition, illustrations are proposed to be added to Section 53 to clarify which contractual arrangements will be disregarded (such as contracts between workmen and secured creditors giving the latter a priority over workmen dues), and which shall be permitted (such as a contract inter se amongst the same class of creditors) for purposes of determining priority in the liquidation waterfall.

III. Preferential, Undervalued, Fraudulent, and Extortionate Transactions

The proposed amendments to Section 43 of the Code relating to PUFE transactions alters the look-back period for identifying PUFE transactions by shifting the reference date from the ‘insolvency commencement date’ to ‘the initiation date’ which is the date of filing the application for CIRP. This is helpful to ensure that certain transactions do not fall outside the look back period owing to the significant time between filing and admission of an application.

Section 47 of the Code (as it stands today) provides creditors with the right to file applications to report undervalued transactions. The Bill seeks to amend this provision to give creditors the right to also file applications with respect to preferential, extortionate credit, fraudulent and wrongful trading transactions. This is an enabling provision that allows creditors to file such applications in case the RP or liquidator fails to do so.

The Code as it stands today empowers the RP and the liquidator to file applications to report preferential transactions, undervalued transactions, and extortionate transactions. However, the power to file an application for fraudulent and wrongful trading vests only with the RP. The proposed amendment to Section 66 (dealing with fraudulent or wrongful trading) seeks to rectify this anomaly and empowers the liquidator (in addition to the RP) to file applications for fraudulent and wrongful trading during the liquidation process.

Further, proposed amendments to Section 26 (dealing with application in respect of PUFE transactions) and Section 54 of the Code (dealing with dissolution of corporate debtor) provide that the filing or pendency of PUFE proceedings does not stay or otherwise interfere with the broader CIRP/liquidation process, and vice versa. PUFE proceedings may continue, and the potential recoveries may be distributed, even after conclusion of the CIRP or liquidation process. Notably, this change codifies the Delhi High Court’s position in Tata Steel BSL Limited v. Venus Recruiter Private Limited, (decided on January 13, 2023) and subsequent judgments, which recognized that adjudication of PUFE proceedings are independent of the resolution of the corporate debtor and can survive CIRP/ liquidation proceedings. The proposed explanation does not specifically provide who would be entitled to the benefit of the recovered amounts. However, Regulation 38(2)(d) of the CIRP Regulations (as amended in 2022) makes it clear that the treatment of PUFE applications and the manner of distribution of any recovered amounts should be provided for in the proposed resolution plan, thereby leaving this decision to the resolution applicant and the wisdom of the CoC when it approves a plan.

The amendment to Section 49 (transactions defrauding creditors) proposes to expand its scope to include not only the assets of the corporate debtor, but also those of related parties of the corporate debtor. This change is intended to ensure that any property of a corporate debtor that is routed through a related party before being sold to a third party will not benefit from the ‘good faith’ exemption in the context of transactions defrauding creditors.

IV. Group Insolvency

The need for specific provisions addressing group insolvency had been discussed in the Report of the Cross Border Insolvency Rules/Regulations Committee on Group Insolvency, which was published in December 2021 (“2021 Report”). The 2021 Report states that many issues have arisen in the application of the Code to group companies, which are inter-linked and where the operations or finances of such companies may be connected to each other. The 2021 Report highlights that adopting a single-entity approach in such cases may not be beneficial, especially when the synergies of the group members might yield better value for the stakeholders involved in the CIRP and liquidation processes.

Through the proposed introduction of Section 59A, a concept of group insolvency has been introduced in the Code. The proposed amendment defines the term ‘group’ as referring to two or more corporate debtors that are interconnected by control, or significant ownership, with significant ownership referring to voting rights of 26% or more. However, the proposed amendment does not specify the framework for conducting insolvency proceedings of group companies and instead contains an enabling provision for the Central Government to prescribe rules in this regard.

It is expected that these rules may prescribe a common bench for such proceedings, coordination between insolvency proceedings, a common insolvency RP and a CoC of all corporate debtors that form part of the group.

V. Guarantors

Under Section 14 of the Code, once an application for CIRP is admitted, the NCLT declares a moratorium on institution and continuation of legal proceedings against the corporate debtor. Section 14(3)(b) as it stands today, provides that the benefit of this moratorium does not extend to guarantors of a corporate debtor, who can still be proceeded against. An explanation is now proposed to be inserted in Section 14 to clarify that the moratorium will prohibit actions by such guarantor against the corporate debtor under a contract of guarantee.

The proposed explanation is intended to clarify the existing position of law that guarantors/sureties cannot invoke their subrogation rights to initiate proceedings or continue existing proceedings against the corporate debtor during the moratorium. Instead, guarantors who have paid under a contract of guarantee will have to file their claims with the RP in the CIRP of the corporate debtor.

Certain changes have also been proposed to the provisions dealing with personal insolvency. The interim moratorium under Section 96 of the Code will no longer apply to applications filed for initiating CIRP in respect of a personal guarantor to a corporate debtor. This is a significant departure from the existing provisions of the Code under which personal guarantors of corporate debtors enjoyed the benefit of an interim moratorium immediately on the filing of the application for personal insolvency. These proposed amendments remove the comforts and remedies available to the personal guarantors of corporate debtors, who would neither be able to invoke subrogation rights by instituting any legal action, nor claim the protection given by the interim moratorium.

VI. IBBI to Regulate the Conduct of CoC

Section 196 (powers and functions of IBBI) of the Code has been proposed to be amended, to empower the IBBI to regulate the conduct of the CoC. This has been the subject of many earlier discussions on whether the CoC should be regulated or subject to a voluntary code of conduct. The extent to which the IBBI proposes to regulate the conduct of the CoC remains to be seen.

VII. Cross-border Insolvency

The need for rules governing cross-border insolvency has been discussed in multiple reports, including the Report of the Joint Committee on the Insolvency and Bankruptcy Code, 2015, which was presented to the Parliament on April 28, 2016. The Insolvency Law Committee Report on Cross Border Insolvency in October 2018, suggested the adoption of the UNCITRAL Model Law on Cross-Border Insolvency, 1997 as part of the Code, with certain modifications. In June 2020, the Committee of Cross Border Insolvency Rules/Regulations prepared a Report on the rules and regulations for cross-border insolvency resolution.

In that context, the Bill proposes the introduction of a new Section 240C that enables the Central Government to make rules for administering and conducting cross-border insolvency proceedings under the Code. While such an enabling provision is a welcome first step, it is surprising that a framework as critical as cross border insolvency is proposed to be left entirely to delegated legislation.

VIII. Creditor-initiated Insolvency

A significant structural reform proposed by the Bill is the insertion of a new Chapter VI-A (Sections 58A to Section 58K), providing a framework for creditor-initiated insolvency process (defined above as ‘CIIRP’). This proposed process is distinct from the CIRP initiated by creditors or by the debtor under Chapter II of the Code, and proposes a creditor-driven, streamlined, out-of-court initiation mechanism for certain classes of corporate debtors. One of its distinctive features is that the management of the affairs of the corporate debtor during the CIIRP remains with the board of the directors or the partners of the corporate debtor unlike a CIRP where it vests with the RP. The CIIRP provides for more limited involvement of the NCLT in comparison to the CIRP (though the NCLT will still have a role in declaring a moratorium, adjudicating grievances of a corporate debtor aggrieved by the initiation of the CIIRP and approving a resolution plan). The proposed amendment thus aims to achieve a faster and more cost-effective resolution, under the NCLT’s limited supervision.

A detailed note on this proposed new chapter will follow in a separate update.

Concluding Remarks

The Bill represents a comprehensive effort to refine and strengthen India's insolvency framework by diligently addressing the existing ambiguities and practical challenges that have emerged since the Code’s enactment in 2016.

Several proposed amendments aim to clarify and streamline existing provisions and processes. Further, the Bill introduces novel concepts that signify a forward-looking approach to insolvency resolution. The proposed introduction of specific provisions for group insolvency, although currently an enabling provision for the Central Government to prescribe rules, acknowledges the challenges to insolvency resolution of interconnected corporate structures. While many proposed changes are aimed at enhancing clarity and efficiency, certain amendments also introduce unique approaches whose practical implications will have to be tested.

As the Bill is currently with a Parliamentary committee, it remains to be seen whether the proposed changes will be adopted as they are or if there will be further significant revisions to the Bill. While the Bill is a welcome step, the success of these reforms will also depend on the formulation and implementation of the accompanying rules and regulations, to ensure that the Code continues to provide a robust and dynamic framework for addressing insolvency.

This insight has been authored by Aparna Ravi, Savani Gupte, K J Chendhil Kumar and Shaneel Mehta from S&R Associates. They can be reached at [email protected], [email protected], [email protected] and [email protected], respectively, for any questions. This insight is intended only as a general discussion of issues and is not intended for any solicitation of work. It should not be regarded as legal advice and no legal or business decision should be based on its content.

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025

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