Insolvency and Bankruptcy Code (Amendment) Bill Overview

The Lok Sabha passed the Insolvency and Bankruptcy Code (Amendment) Bill during the Parliament Budget Session. The bill, which was sent back by the 'Select Committee', aims to replace the underutilized fast-track process for small companies with a more efficient framework.

Key Highlights

• New Framework: The bill proposes a creditor-initiated insolvency framework featuring out-of-court settlements, debtor-in-possession, and creditor-in-control models.
• Mandatory Admission: The amendment mandates the admission of insolvency applications within 14 days once a company's default is established.
• IBC's Impact: The code has resolved 1,376 companies, enabling creditors to recover Rs 4.11 lakh crore as of December 2025.
• Credit Ratings: The IBC has improved the credit ratings of companies.
• Penalties: The bill proposes penalties to prevent abuse of the process.
• Litigation Delays: Extensive litigation is identified as the primary reason for IBC resolution delays.
• Protection of Workmen's Interests: Workmen's dues are prioritized under the IBC process.
• Banking Sector Health: The insolvency law has significantly improved the health of the country's banking sector, with more than half of the NPAs recovered.

Legislative Process

On August 12, 2025, the government introduced the bill in the Lok Sabha to amend the IBC, proposing changes to reduce the time for admitting insolvency resolution applications. The bill, which has undergone seven amendments so far, was referred to a select committee that submitted its report in December 2025.