The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 is a legislative proposal introduced to update and strengthen India’s existing insolvency framework under the Insolvency and Bankruptcy Code, 2016.
It seeks to address practical challenges that have emerged over the years, such as delays in admitting cases, prolonged resolution timelines, misuse of withdrawal provisions, uncertainty around creditor rights, and value erosion during liquidation.
The Bill introduces clearer rules for admission of insolvency applications, tighter controls on withdrawals, stronger creditor oversight, faster liquidation timelines, and enhanced safeguards for resolution applicants through statutory recognition of the “clean slate” principle.
It also expands regulatory oversight, improves treatment of guarantor assets, strengthens avoidance action mechanisms, and introduces structured frameworks for group and cross-border insolvency.
Top 15 Changes in the Insolvency and Bankruptcy Code (Amendment) Bill, 2025
#1 Expansion of the “service provider” regime under IBBI
One of the quieter but far-reaching changes is the widening of the definition of “service providers” regulated by the Insolvency and Bankruptcy Board of India (IBBI).
Until now, oversight was largely limited to insolvency professionals, their agencies and information utilities.
The amendment empowers the government to notify any additional category of service providers in the future and place them under IBBI supervision.
In practical terms, this strengthens discipline across the insolvency ecosystem and plugs regulatory gaps that had emerged as new intermediaries began influencing insolvency outcomes without being directly accountable.
#2 Mandatory admission of insolvency applications on proof of default
The Bill makes it clear that once default and statutory compliance are established, the Adjudicating Authority (NCLT) must admit the application. Discretion to delay or refuse admission is sharply curtailed.
If admission is not decided within 14 days, written reasons must be recorded. This directly addresses inconsistent admission practices across benches and should significantly reduce the “pre-CIRP limbo” that often delayed creditor remedies.
#3 Much tighter rules for withdrawal of admitted cases
Withdrawals after admission have frequently been misused to pressure creditors or stall proceedings. The amendment responds firmly:
- Withdrawal is allowed only after constitution of the Committee of Creditors (CoC)
- It requires 90% CoC approval
- It cannot be done after the first invitation for resolution plans
- The withdrawal application must be disposed of within 30 days
The message is clear: once CIRP starts, it cannot be treated as a bargaining chip.
#4 Two-stage approval of resolution plans
A major procedural innovation is the introduction of two separate approvals by the NCLT.
First, the tribunal can approve the implementation and takeover aspects of a resolution plan, allowing the successful applicant to take control and run the business.
Distribution to stakeholders can then be approved separately within 30 days.
This change directly tackles situations where commercially viable plans were stuck only because distribution mechanics were being litigated, leading to value erosion.
#5 Explicit “clean slate” protection after plan approval
While courts have recognised the clean-slate principle, the amendment codifies it. Once a resolution plan is approved, all prior claims stand extinguished, except those specifically preserved in the plan.
This statutory clarity gives resolution applicants confidence that they are not inheriting unknown or revived liabilities years later.
#6 Restoration of CIRP even after liquidation begins
The Bill introduces a limited but important safety valve. In exceptional cases, liquidation can be reversed and CIRP restored once, for up to 120 days, with 66% CoC approval.
This acknowledges the reality that value-maximising opportunities sometimes emerge late and that liquidation should not always be a point of no return.
#7 Extended moratorium during liquidation
The moratorium, earlier limited to CIRP, is extended to cover all proceedings during liquidation as well.
This reduces parallel litigation, protects asset value, and prevents aggressive enforcement actions that could disrupt orderly liquidation.
#8 Corporate debtor barred from nominating the IRP
To address concerns around independence, corporate debtors can no longer nominate the Interim Resolution Professional.
This change removes a long-criticised conflict of interest and improves confidence in the neutrality of the early stages of CIRP.
#9 Clear bar on guarantor subrogation during moratorium
The amendment clarifies that guarantors who pay off a corporate debtor’s dues cannot enforce subrogation rights during the moratorium.
In simple terms, guarantors cannot step into the shoes of creditors and claim repayment from the company while CIRP is ongoing. This preserves the asset pool for collective resolution.
#10 Bringing guarantor assets into the insolvency estate
If a lender enforces a corporate guarantee and takes possession of a guarantor’s asset, that asset can now be pulled into the corporate debtor’s CIRP, subject to CoC approval.
This significantly expands the asset base available for resolution and prevents fragmented enforcement that weakens overall recovery.
#11 Minimum payout protection for dissenting financial creditors
To balance majority rule with fairness, the Bill mandates that dissenting financial creditors must receive at least the lower of:
- their liquidation value, or
- their entitlement under the resolution plan based on the waterfall
This reduces hold-out behaviour while ensuring a statutory floor for recovery.
#12 Stronger creditor oversight in liquidation
Liquidation is no longer a process where the liquidator merely “consults” stakeholders. The CoC is given an active oversight role, similar to CIRP.
Key decisions such as replacement of the liquidator or pursuing fraud actions require 66% CoC approval, shifting liquidation from a professional-driven to a creditor-driven process.
#13 Fixed liquidation timelines and claim continuity
Liquidation must be completed within 180 days, with only one extension of up to 90 days.
Importantly, the claims admitted during CIRP will carry forward into liquidation.
Fresh claims will not be invited, bringing finality and avoiding repetitive verification exercises.
#14 Expanded look-back period for avoidance transactions
The look-back window for identifying preferential, undervalued or fraudulent transactions is widened. Instead of starting only from CIRP admission, it can now go back to the date of filing of the insolvency application.
Further, if the resolution professional or liquidator fails to act, creditors themselves can initiate avoidance proceedings. Related-party transactions also lose several safe-harbour protections.
#15 Clearer rules for secured creditors and security interests
Two linked changes stand out:
- Secured creditors must decide within 14 days whether they want to realise security outside liquidation, and shared security requires 66% CoC consent.
- “Security interest” is narrowly defined to arise only from contractual arrangements, not merely by operation of law.
Together, these changes improve predictability in asset distribution and reduce post-liquidation disputes.
Follow The Legal QnA For More Updates…
