Finance Minister Pilots IBC Amendment Bill: Lok Sabha Approves Key Reforms

The Lok Sabha on Monday passed a bill amending the Insolvency and Bankruptcy Code (IBC), introducing measures aimed at expediting corporate insolvency resolution, providing out-of-court settlement options, and establishing a framework for cross-border insolvency processes. Finance and Corporate Affairs Minister Nirmala Sitharaman piloted the bill in the Lower House, describing it as “vital” for strengthening India’s insolvency framework.

Sitharaman highlighted that the amendments comprise 12 key changes to the IBC, which was enacted in 2016, aimed at maximising value for stakeholders and improving governance of the insolvency process. The minister noted that the reforms seek to address practical challenges, incorporate global best practices, and further enhance the health of the country’s banking sector.

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, was originally introduced in the Lok Sabha on August 12, 2025, and subsequently referred to a select committee, which submitted its report in December 2025. Sitharaman stated that all recommendations of the committee have been accepted. The IBC has been amended seven times previously, reflecting the government’s ongoing efforts to fine-tune corporate insolvency mechanisms.

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Key changes under the bill include replacing the underutilised fast-track process with a new creditor-initiated insolvency framework, featuring out-of-court initiation, a debtor-in-possession model, and a creditor-in-control structure. Under this approach, management remains with the existing Board of Directors or partners with safeguards, while defined timelines ensure quicker resolution of stressed companies.

The bill also introduces provisions for group insolvency and cross-border cases to boost investor confidence and align domestic practices with international standards. Stricter timelines have been mandated, including admission of applications for insolvency resolution within 14 days of established default, and appeals before the National Company Law Appellate Tribunal (NCLAT) to be decided within three months. Penalties ranging from Rs 1 lakh to Rs 2 crore have been proposed to deter frivolous or vexatious complaints that can delay proceedings.

Sitharaman noted that extensive litigation has been the primary cause of delay in insolvency proceedings. She added that the amendments are designed to streamline processes, prevent abuse, and enable a more predictable and efficient framework for resolving corporate distress, thereby strengthening the overall financial ecosystem of the country.

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