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[2025] 178 taxmann.com 443 (Article)

Introduction

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (“Bill“) proposes the single biggest overhaul to the existing insolvency framework in India since the Insolvency and Bankruptcy Code, 2016 (“Code“) came into effect in December 2016. The Bill attempts to address various challenges that have arisen with the Code’s implementation and to clarify ambiguities and unintended consequences that have resulted from certain judicial decisions. These changes include amendments to streamline the corporate insolvency resolution process (“CIRP“), changes to provide for supervision of the liquidation process by the committee of creditors (“CoC“), clarifications on treatment of security interests in liquidation and changes to the framework for preferential, undervalued, fraudulent, and extortionate credit (“PUFE”) transactions. In addition, the Bill introduces new concepts such as the creditor-initiated insolvency resolution process (“CIIRP“), which provides an alternative process to the CIRP under the Code and enabling provisions for the Government to frame rules on group insolvency and cross border insolvency. These proposed amendments collectively aim to restore the Code’s core principles of clarity, speed, and commercial certainty, while adapting to the evolving requirements of creditors, insolvency professionals, and the broader financial ecosystem. The Bill, which was introduced in the Lok Sabha on August 12, 2025, has now been referred to a select committee of the Parliament for its consideration.

This note decodes the key amendments proposed by the Bill.

I. Corporate Insolvency Resolution Process

The proposed changes to the CIRP focus on enhancing efficiency, reducing judicial discretion, regulating withdrawal of admitted applications and clarifying the roles and responsibilities of key stakeholders.

1. Initiation of CIRP

Section 7 of the Code (initiation of CIRP by a financial creditor) is proposed to be amended to expressly specify the grounds on which the adjudicating authority i.e., the National Company Law Tribunal (“NCLT”) must admit or reject applications for initiation of CIRP by financial creditors. The proposed amendments bring about the following clarifications with respect to applications filed under Section 7 of the Code:

(a) Removal of judicial examination and discretion in admitting/ dismissing applications: The proposed amendment provides three exhaustive grounds to be examined by the NCLT, which are: (i) the occurrence of a default; (ii) whether the application is complete in all respects; and (iii) that there are no pending disciplinary proceedings against the proposed resolution professional (“RP”). The proposed Explanation I to Section 7 also categorically provides that no grounds apart from these grounds shall be considered in admitting or rejecting an application.
This proposed amendment seeks to overcome the impact of the Supreme Court’s decision in Vidarbha Industries Power Limited v. Axis Bank Limited [2022] 140 taxmann.com 252/173 SCL 355 (July 12, 2022) where the Supreme Court held that the NCLT has the discretion to refuse to admit an application under Section 7 (despite the occurrence of a default), if there are other ‘good reasons’ made out by the corporate debtor. Relying on the use of the word ‘may’ in Section 7(5), the Supreme Court held that the provision is discretionary and not mandatory. The proposed amendment now seeks to remove all judicial discretion by mandating that, if the above grounds are satisfied, the NCLT ‘shall’ admit the application.

(b) Information Utility (“IU“): The proposed amendments clarify that the record of default with an IU is sufficient to ascertain the existence of debt and default by the NCLT. This clarification is again intended to remove judicial discretion and speed up the admission process. This proposal emanates from the notice released by the Ministry of Corporate Affairs (“MCA”) titled “Invitation of comments from the public on changes being considered to the Insolvency and Bankruptcy Code, 2016” dated January 18, 2023 (“MCA Notice”), which highlighted the need for increasing reliance on the record submitted with the IU during the admission process. This was also reaffirmed and discussed in detail in the discussion paper released by the Insolvency and Bankruptcy Board of India (“IBBI”) titled “Strengthening the process of issuance of record of default by Information Utility” dated May 10, 2024.

Amendments have also been proposed to Section 9 of the Code (which empowers an operational creditor to file for commencement of CIRP) and Section 10 of the Code (which empowers the corporate debtor itself to file for commencement of CIRP) to ensure consistency with the requirement of recording reasons if the order of admission or rejection is not passed within 14 days. Section 215 of the Code (which provides the procedure for submission of financial information) is also proposed to be amended to require operational creditors to submit information to the IUs before filing an application under Section 9. Currently, this is not a mandatory requirement for operational creditors.

Another proposed amendment to Section 10 of the Code seeks to do away with the right of corporate debtors to nominate an interim resolution professional (“IRP“) in the application filed by them for initiating CIRP. A corresponding amendment is also proposed to Section 16 of the Code (which deals with appointment and tenure of the RP). Under the proposal, for any application filed by a corporate debtor for initiating CIRP, the NCLT will make a reference to the IBBI for a recommendation of an insolvency professional to act as an IRP. This proposal also stems from the MCA Notice, which clarifies that, to hold the trust and confidence of the CoC, an independent person should be appointed as an IRP to prevent the misuse of Section 10 of the Code.

2. Withdrawal of admitted applications

The Bill proposes to amend the framework for the process and timelines for withdrawal of admitted applications under Section 12A of the Code. Under the proposed amendment, an admitted application may only be withdrawn, on an application by the RP, after the CoC has been constituted, and with the consent of members of the CoC representing not less than 90% of the voting share. The proposed amendment also clarifies that no application for withdrawal shall be entertained after the first invitation for submission of a resolution plan has been issued, thereby limiting the overall time period during which admitted applications may be withdrawn.

The proposed amendments are a departure from the current position on withdrawal of CIRP applications. Section 12A (as it stands today) also contemplates withdrawal of an application only with the consent of the CoC. However, under Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations“) an application which is admitted can be withdrawn before the constitution of the CoC, by the applicant, through the IRP.
The proposed amendment is seemingly in response to the issue that arose in the Supreme Court’s decision in GLAS Trust Company LLC v. Byju Raveendran [2024] 167 taxmann.com 619 / [2025] 187 SCL 14 (decided on October 23, 2024), where the Board of Control for Cricket in India tried to withdraw the CIRP application after it was admitted, but when the constitution of the CoC was stayed. Despite the appellant’s reliance on Regulation 30A of the CIRP Regulations, the Supreme Court held that any application to withdraw an admitted CIRP would require the support of 90% of the CoC.

The proposed amendment clarifying the outer time limit for withdrawing an admitted application appears to be in response to the decision of the Supreme Court in Brilliant Alloys Private Limited v. Mr. S Rajagopal [Petition (s) for Special Leave to Appeal (C) No.(C) 31557 of 2018, dated 14-12-2018] where the Supreme Court viewed the restriction in Regulation 30A of the CIRP Regulations on withdrawing applications after the issuance of expression of interest (without an explanation), as a directory provision.

Together, the proposed changes to Section 12A emphasize that the CIRP is a collective process and an application, once admitted, can only be withdrawn during a limited time period and with the consensus of 90% of the CoC.