NEW DELHI: A lender-initiated, debtor-in-control resolution process, as proposed under the Insolvency Bill, is a big step towards faster resolution of insolvency cases in India, feel experts.
The Insolvency & Bankruptcy Code (Amendment) Bill, 2025, which was tabled in parliament on Tuesday, has proposed the ‘creditor-initiated insolvency resolution process’, under which a resolution process can be initiated on approval of 51% of the financial creditors. However, the management of the company continues to be vested with the existing board of directors of the company under the supervision of the resolution professional appointed by financial creditors.
The delay in getting approval of the adjudicating authority (NCLT) is the biggest reason for delay of the whole resolution process. In order to address this issue, the Bill proposes that a creditor-initiated resolution process can be initiated without the need for NCLT approval.
“The process contains provisions for approaching the adjudicating authority at different stages but not for the initiation of the process unless objected by the corporate debtor,” says Surendra Raj, partner, Grant Thornton.
According to Soumitra Majumdar, partner, JSA Advocates & Solicitors, the adjudicating authority is mandated to consider only instances of default for initiation of corporate insolvency resolution plan (CIRP). “Narrowing the scope of adjudication should significantly lessen the adjudication timelines and thus solve for the admission delays and the consequent value erosion,” Majumdar says.
The eligibility of the defaulting entities which can be resolved under this process would depend upon the amount of assets, Income and amount of debt, which are yet to be notified. “This is a very unique and important step and for it to be successful, regulations to implement such amended provisions should not be very water tight,” feels Surendra Raj of Grant Thornton.
As per the Bill, the creditor-initiated insolvency resolution process should be completed within a period of 150 days from the commencement date. The NCLT may extend the period by 45 days with the approval of the committee of creditors. Such extension could be given only once.
Siddharth Srivastava, partner, Restructuring & Insolvency, Khaitan & Co, says that the introduction of an out-of-courts mechanism in the form of creditor-initiated insolvency process with a reduced initiation approval threshold of 51% of creditors is a step forward in enhancing the rights of creditors to resolve debt quickly and boost credit cycle. “This is also similar to the concept of pre-packs in the UK and the US,” he added.