The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 has received Presidential assent as the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (the “Act”) and will come into force on notification by the Central government. It makes significant changes to the Insolvency and Bankruptcy Code, 2016, codifying, qualifying, and materially reshaping insolvency practice in India.

The Act removes the discretion previously read into Section 7 and largely restores the mandatory-admission approach recognised in Innoventive Industries Ltd. v. ICICI Bank, while effectively reversing the broader reading of Vidarbha Industries Power Ltd. v. Axis Bank Ltd. The NCLT is now required to admit a Section 7 application where debt and default are established and no disciplinary proceedings are pending against the proposed interim resolution professional (“IRP”). Where an application is defective, the applicant must be given 7 days to cure the defects before rejection. If the application is not admitted within 14 days, the NCLT must record reasons for the delay, reinforcing the Code’s emphasis on speed at the threshold stage.

The Act narrows “security interest” and legislatively overturns State Tax Officer (1) v. Rainbow Papers Limited, by confining it to interests created by agreement, not by operation of law, thereby restoring the primacy of consensual security in insolvency.

Section 52 now requires a secured creditor seeking to realise its security to intimate the liquidator within 14 days of liquidation commencement, failing which the security is deemed relinquished to the liquidation estate.

Section 53 now limits priority to the value of relinquished security, with any balance classified as unsecured debt. It also clarifies that only government dues for the two years preceding liquidation fall within Section 53(1)(e)(i); older dues rank lowest under Section 53(1)(f).

The amended definition of “resolution plan” expressly includes merger, amalgamation, demerger, and sale of one or more assets through one or more plans proposed by one or more applicants, giving greater flexibility in complex restructurings.

The CoC must now vote separately on the resolution plan and its distribution mechanism. The NCLT is expected to decide within 30 days and record reasons for delay. The Act also shifts competition-law approvals to before submission of the plan to the NCLT, broadly aligning practice after Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Others, and preserves licenses, approvals, and government concessions for their term, subject to continued compliance.

An implementation committee comprising an insolvency professional, representatives, and the resolution applicant is introduced to supervise implementation of the approved plan.

The Act also codifies the “clean-slate” principle recognised in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., claims not forming part of the approved plan stand extinguished, while claims against guarantors and promoters survive.

Violations of the moratorium or an approved resolution plan are decriminalized and now attract civil consequences, including monetary penalties.

The Act clarifies the minimum payment due to a dissenting financial creditor: it must receive at least the lower of (i) the liquidation value attributable to it, or (ii) the amount it would receive under the resolution plan applying the liquidation waterfall. The provision applies where liquidation has not yet commenced.

In voluntary CIRP under Section 10, the corporate debtor can no longer nominate the IRP in its own application.

Instead, the Adjudicating Authority must seek a recommendation from the IBBI, and the IRP will be appointed on that basis under the new Section 16(3A).

This addresses concerns that promoter-driven Section 10 applications were accompanied by nominations of insolvency professionals perceived to be sympathetic to existing management, thereby enhancing transparency and reducing the risk of undue influence in the early stages of CIRP.

The Act expands the role of the IRP/RP under Section 18(b). While the pre-amendment position, noted in Swiss Ribbons Pvt. Ltd. v. Union of India, treated the RP’s role as largely administrative, the explanation now permits the IRP/RP, while collating and verifying claims, to determine their value.

This is intended to reduce delay in claim admission, though the scope of challenge to such determination will likely require further judicial clarification.

Section 12A is amended without altering the 90% CoC voting threshold. However, withdrawal of CIRP can now occur only after the CoC has been constituted and after the first invitation for submission of resolution plans has been issued. The amendment curtails the broader settlement flexibility and ensures that the CoC’s oversight is engaged before the process is brought to an end.

By inserting Section 33(1A), the Act allows the NCLT, before ordering liquidation, to restart CIRP if no plan is submitted within the maximum period or if a resolution plan is rejected, provided the CoC approves with at least 66% voting share. Where no plan was received, the process may restart from the stage of inviting plans. This restoration is available only once and must conclude within 120 days, failing which liquidation follows.

The Act, by way of amendment to Section 54 requires liquidation to be completed within 180 days, extendable by up to 90 days, with an overall outer limit of one year; voluntary liquidation is also to be completed within one year.

To strengthen the Stakeholders Consultation Committee (“SCC”), it will now oversee liquidation in a manner similar to its role during CIRP. This departs from the earlier framework, under which the liquidator was only required to consult the SCC without being bound by its advice.

The Act introduces Section 5(2A), defining “avoidance transactions” with reference to Sections 43, 45, 49, and 50, and “fraudulent or wrongful trading” with reference to Section 66. Section 26 clarifies that completion of CIRP or liquidation does not extinguish such avoidance proceedings.

It also permits creditors, individually or jointly, to seek avoidance of a fraudulent transaction where the RP or liquidator has failed to do so.

Under the Act, office-holders have enhanced powers. Section 19 now requires not only current personnel and directors, but also former personnel, former directors, and service providers of the corporate debtor to fully cooperate with the IRP, RP, and liquidator.

Liquidators are also no longer required to verify claims afresh, and may instead update claims previously verified during the CIRP.

The Act introduces Chapter IV-A, establishing the Creditor-Initiated Insolvency Resolution Process (“CIIRP”), a creditor-led mechanism that expands the pre-packaged insolvency framework and is available to specified corporate debtors meeting asset or income criteria, rather than being restricted to MSMEs.

A financial creditor representing a recognised class of creditors may, upon default, notify the corporate debtor of its intention to appoint an RP, subject to 51% approval within that class. The corporate debtor has 30 days to respond; if the creditor chooses to proceed, it must again obtain 51% approval within further 30 days.

Once appointed, the RP must make a public announcement and notify the NCLT and the IBBI, and fresh CIRP applications against the corporate debtor are barred.

The corporate debtor may challenge initiation of CIIRP where default is not found. Conversely, if a default did occur but the process was not correctly followed, the NCLT may convert the CIIRP into a CIRP.

CIIRP must be completed within 150 days, extendable by 45 days with NCLT approval. The RP performs functions broadly analogous to those in CIRP, including claim verification, preparation of the information memorandum, inviting resolution plans, and filing avoidance proceedings where required.

During the CIIRP, management remains with the Board, but the RP must attend Board meetings and may intervene if Board actions are inconsistent with the process. Fraudulent conduct during CIIRP attracts monetary penalties.

The NCLT may impose a moratorium on the RP’s application, and any resolution plan requires 66% CoC approval followed by NCLT sanction.

Failure to receive or approve a resolution plan within 150 days, or non-cooperation by management, may result in conversion of CIIRP into CIRP. The CoC may also seek such conversion at any time.

The Act expressly provides that the interim moratorium shall not apply where insolvency proceedings are initiated against a personal guarantor to a corporate debtor, departing from the earlier position where filing triggered interim protection and, in practice, enabled delay.

Further, where no repayment plan is submitted within the prescribed period, the PIRP terminates and the creditors may initiate bankruptcy proceedings against the personal guarantor.

The Act also introduces Section 183A which permits the imposition of monetary penalties for frivolous proceedings.

Overall, the Act pushes the Code toward greater speed, predictability, and creditor control. Its most significant features are curtailed admission-stage discretion, codification of the clean-slate principle, and introduction of CIIRP as a creditor-led insolvency mechanism. The amendments thus represent both procedural tightening and substantive recalibration of India’s insolvency regime.

About the authors: Himanshu Vidhani is a Partner and Shloka Dikshit is an Associate at Quadra Legal.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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