The Lok Sabha on Monday cleared the Insolvency and Bankruptcy Code (Amendment) Bill, paving the way for a shift from the the previous barely used fast-track resolution mechanism to a new framework that allows creditors to trigger insolvency proceedings. Finance Minister Nirmala Sitharaman said the Insolvency and Bankruptcy Code (IBC) has played a key role in resolving corporate distress, with 1,376 companies successfully settled so far, leading to recoveries amounting to ₹4.11 lakh crore. The proposed changes aim to speed up the admission of insolvency cases while also introducing provisions to deal with group insolvency and cross-border distress situations.
"The earlier framework was not fully utilised. It is now being replaced by a new creditor-initiated insolvency framework featuring out-of-court settlements, debtor-in-possession, and creditor-in-control models," she said.
Emphasising the broader impact of the Code, she said it has emerged as an effective mechanism for the recovery of non-performing assets (NPAs), particularly for Scheduled Commercial Banks. Citing the available data she said that banks have recovered ₹1,04,099 crore through multiple channels, of which a substantial ₹54,528 crore has come via resolutions under the IBC framework.
The Bill has proposed 12 amendments to the IBC, which was introduced in 2016.
A key feature of the amendment is the discontinuation of the earlier fast-track Corporate Insolvency Resolution Process (CIRP), which was designed for smaller firms with shorter timelines but saw limited uptake. In its place, the Bill introduces a creditor-driven insolvency model that seeks to make the process more flexible and efficient. The new approach allows for creditor-initiated proceedings, incorporates the possibility of out-of-court settlements, and provides for a “debtor-in-possession, creditor-in-control” structure.
The Finance Minister told the Parliament that primary reason for IBC resolution delays is extensive litigation and thus the new Bill proposes penalties to prevent abuse of process.
Under this system, the management of the stressed company can continue to remain with the existing board of directors or partners, subject to safeguards and clearly defined timelines. The government expects that these changes will not only accelerate resolution timelines but also improve value realisation for lenders while preserving business continuity in viable cases.