The expanding commercial wisdom of CoC: Will the IBC (Amendment) Act 2026 actually reduce delays?

The architectural foundation of India’s Insolvency and Bankruptcy Code, 2016 (“IBC”), marks a structural shift from the archaic debtor-in-possession model to a creditor-in-control paradigm. Central to this design is the Committee of Creditors (“COC”), an entity whose “commercial wisdom” has been elevated by judicial interpretation into nearly unassailable doctrine.

Despite this, the primary criticism of the IBC remains its long timelines. By late 2025, the Insolvency and Bankruptcy Board of India (“IBBI”) recorded that the average duration of the Corporate Insolvency Resolution Process (“CIRP”) had drifted past 600 days, far exceeding the statutory limit of 330 days under Section 12(1).

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 - extensively evaluated by the select committee and enacted as the Insolvency and Bankruptcy (Amendment) Act, 2026 - addresses these systemic delays. By introducing out-of-court pathways, like the Creditor-Initiated Insolvency Resolution Process (CIIRP), a restructured two-stage Section 31 resolution mechanism, and extending CoC authority into the liquidation stage, the legislature aims to achieve speed to increased credit primacy.

This article explores whether expanding the COC authority will truly reduce delays or if it overlooks the structural and behavioral dynamics that drive friction within the committee of creditors.

A major source of delays under the IBC has been the friction between legislative intent and shifting judicial interpretations. The 2026 Act actively corrects the specific rulings that gave the National Company Law Tribunal (“NCLT”) wider discretion, which the corporate debtors often used to delay proceedings.

Removing Discretion: The Vidarbha mandate

In Vidarbha Industries Power Ltd. v. Axis Bank Ltd., the Supreme Court held that the NCLT had the discretion to refuse an insolvency admission under Section 7 even if a debt and default were clearly established. This introduced subjectivity into what was meant to be an objective entry point, causing front-end admission delays to stretch across months.

The 2026 Act amends Section 7(5), replacing “may” with “shall”. It mandates that if a default is verified by an information Utility (“IU”) and no disciplinary proceedings face the proposed Resolution Professional (“RP”), the NCLT must admit the application within 14 days. If it fails to do so, it must record its reasons for the delay in writing.

Restoring the waterfall: Overturning Rainbow Papers

In State Tax Officer v. Rainbow Papers Chemical Ltd., the Supreme Court held that statutory dues owed to the government could make it a secured creditor if the local state legislation created a first charge over the debtor’s assets. This disrupted the distribution hierarchy under Section 53, prompting state authorities to file numerous claims that stalled the resolution plans.

The 2026 Act clarifies Section 3(31) and Section 53, explicitly stating that a security interest must arise out of a commercial agreement or arrangement, not merely by operation of law. By removing statutory interests from the definition of secured debt, the amendment reduces priority litigation and aims to protect the value of the assets for commercial lenders.

Perhaps the most practical change in the 2026 Act is the structuring of Section 31 regarding how resolution plans are approved. Previously, the NCLT had to pass a single order approving a comprehensive plan that addressed both the operational revival of the corporate debtor and the precise financial distribution among creditors. This format allowed dissenting financial or operational creditor to stall the entire business revival while fighting over their specific payouts.

The 2026 Act split the process into two separate steps with a strict 30-day window between them.

Stage 1: Implementation order - corporate debtor exits, moratorium, and resume operations.

Stage 2: Distribution order - NCLT adjudicates internal payout disputes between creditors.

This structural separation ensures that the business can resume operations under the new management without being delayed by internal financial disputes among lenders.

Historically, once a corporate debtor entered liquidation, the CoC‘s role concluded, transferring oversight to a liquidator assisted by a non-binding Stakeholder Consultation Committee (“SCC”). This often resulted in slow asset liquidations and rising administrative costs.

The 2026 Act extends the CoC’s supervisory authority directly into the liquidation stage:

• Appointment and control: The CoC is empowered to appoint, oversee, and replace the liquidator by a 66% majority vote. However, following the Select Committee's recommendations, an IRP/RP who managed the failed CIRP is generally ineligible for appointment as a liquidator to avoid conflicting financial incentives.

• Active supervision: The CoC supervises the liquidation process to help the liquidator make market-driven asset sales.

• Managing dissolution contingencies: Under the amendment, if avoidance transactions or distribution disputes remain unresolved at the time of a company dissolution, the court must decide how those proceedings will be managed and how any future recovery will be allocated.

This expansion is supported by recent rulings, such as the Supreme Court decision in Torrent Power Ltd. v. Ashish Arjunkumar Rathi, 2026, which reaffirmed that commercial decisions, including late-stage negotiations and bidding structures like e-challenges, fall within the protected domain of the CoC‘s commercial wisdom, provided they meet basic statutory requirements.

To address the delays prior to format court admission, the 2026 Act introduces the Creditor-Initiated Insolvency Resolution Process (CIIRP) under a new Chapter IV-A (Sections 58A to 58K).

Designed for specific classes of corporate debtors, CIIRP functions as a hybrid, out -of-court mechanism:

• Initiation: Financial institutions holding at least 51% of the outstanding debt can initiate the process out of court, bypassing initial NCLT admission delays.

• Debtor notice: The initiating creditors must provide a mandatory 30-day notice to the corporate debtor to allow for representation or the rectification of defaults.

• Speed: The entire CIIRP must be completed within 150 days (with a single 45-day extension allowed via a 66% CoC Vote). If a resolution plan fails to materialize, the process converts into a standard CIRP.

While the 2026 Act introduces several valuable mechanisms, its focus on reducing judicial discretion may not fully address the internal behavioral dynamic of the CoC itself.

Fractured creditor incentives

The doctrine of “commercial wisdom” treats the CoC as a unified decision-maker, but in practice, committees often consist of coalitions of lenders with different risk tolerances and security profiles:

By shielding the CoC’s decision from substantive judicial review, the law prevents outside interference, but it does not necessarily resolve internal negotiation logjams. Expanding the CoC’s powers without adding clear guidelines for internal ordination may simply shift delays from courtrooms to the committee boardrooms.

The infrastructure bottleneck

The 2026 Act requires the NCLT and NCLAT to provide written explanations for the exceeding procedural deadlines, such as a 30-day limit for reviewing plan withdrawals or a 3-month target for NCLAT appeals. However, statutory mandates to explain delays do not automatically fix infrastructural shortages. High vacancy rates and significant case backlogs across NCLT benches remain a primary source of systemic delay.

The Insolvency and Bankruptcy Code (Amendment) Act, 2026, introduces several practical procedural updates. By correcting the complications from Vidarbha Industries and Rainbow papers, dividing the resolution plan approval process into two separate stages, and establishing the CIIRP pathway, the Bill removes several key drivers of litigation.

However, viewing judicial intervention as the sole cause of delay is an incomplete diagnosis. True efficiency requires addressing the structural and behavioral dynamics within the CoC, such as conflicting creditor incentives and slow internal approval processes. For these legislative changes to successfully accelerate resolutions, the governments must apply them with an expansion of the NCLT’s judicial capacity and administrative resources. Without addressing these underlying bottlenecks, the 2026 Act risks shifting the location of procedural delays rather than eliminating them entirely.

About the authors: Shubham Rathod is a Senior Associate, Ruchika Jain and Arahant Dhotre are Associates at Rishabh Gandhi and Advocates.

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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