HSA | Restructuring & Insolvency Monthly Update | October 2025

STATUTORY UPDATES

Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2025 dated October 14, 2025

• The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Liquidation Process Regulations) has been amended to omit the provisions relating to sale of the Corporate Debtor as a going concern.
• This amendment has been brought in to streamline the liquidation process, reduce delays and cost escalation. By way of this amendment, IBBI aims to align the provisions with the scheme of the IBC i.e. to attempt resolution by way of a Corporate Insolvency Resolution Process (CIRP) and in the event no resolution is achieved, move to liquidation for dissolution of the Corporate Debtor.
• Accordingly, Regulation 32A providing for sale of the Corporate Debtor as a going concern, has been omitted.
• Consequently, Regulation 31A(1)(f), which allowed the Stakeholder's Consultation Committee (SCC) to advise the Liquidator on matters related to a review of marketing strategy in case of failure of sale of Corporate Debtor as a going concern and Regulation 32 (e) and (f), also relating to sale of Corporate Debtor as a going concern, have been deleted.

Insolvency and Bankruptcy Board of India (Corporate Insolvency Resolution Process) (Sixth Amendment) Regulations, 2025 dated October 14, 2025

• As stated above, IBBI has amended the Liquidation Process Regulations, in order to do away with the concept of sale of the Corporate Debtor as a going concern during liquidation process.
• Simultaneously, IBBI has made the following necessary amendments in Insolvency and Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulations, 2016 (CIRP Regulations), in order to streamline the processes under the IBC.
• Regulation 39C of the CIRP Regulations relating to assessment of sale as a going concern has been omitted. Further, necessary amendments have also been made Regulation 39D relating to fee of the liquidator and in Form H in the option relating to recommendation by the Committee of Creditors (CoC) for sale of the Corporate Debtor as a going concern, to omit the provisions relating to sale of the Corporate Debtor as a going concern.

Discussion Paper dated August 06, 2025, titled "Measures to enhance integrity of the Corporate Insolvency Resolution Process"

• Express duty of Committee of Creditors to deliberate on eligibility of Resolution Applicant (RA) under Section 29A of the Insolvency and Bankruptcy code, 2016
  • The IBC and the IBBI (Corporate Insolvency Resolution Process) Regulations, 2016 (CIRP Regulations) cast a duty on the Resolution Professional (RP) to ensure eligibility of a RA under Section 29A of the IBC. While the IBC impliedly also cast duty on the CoC to deliberate on Section 29A, it does not expressly warrants the CoC to ensure the same.
  • In order to secure transparency and reduce unwarranted litigations, the IBBI has proposed to expressly cast a duty on the CoC, to formally discuss the eligibility of RA under Section 29A of the IBC, the due diligence report obtained by the RP and record the same in the minutes, ensuring consistency with the spirit of the IBC.
• Enhanced disclosures in a Resolution Plan to ensure a clean slate resolution
  • Section 32 of the IBC grants immunity to the Corporate Debtor for offences committed prior to commencement of CIRP provided, the approval of resolution plan results in change of management. The practical usage of this immunity, however, is challenging due to complex and multilayered ownership structures in the resolution plan. The potential beneficiaries of Section 32A remains unidentified and the benefit of Section 32A becomes difficult to avail.
  • In order to practically implement Section 32A of the IBC, the IBBI has proposed to mandatorily require disclosure in a resolution plan regarding beneficial ownership of the resolution applicant, which will enable the RP and the CoC to establish identity of such potential beneficiaries. This disclosure will require the RA to submit a statement of ownership, in a given format, including details of all natural persons who own or controls the RA. This disclosure will further require the RA to submit an affidavit declaring eligibility under Section 32A of the IBC.
  • By way of this amendment, the IBBI aims to ensure transparency in the decision making and prevent potential misuse.
• Digitalisation of the process for invitation and submission of Resolution Plans
  • The IBBI proposes to mandate the conduct of the process of inviting and submitting a resolution plan exclusively through electronic means by way of a specified platform. This will ensure confidentiality of sensitive information and prevents any undue advantage.

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (As introduced in Lok Sabha)

• The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 proposes to introduce the certain amendments in the IBC with the aim to reduce delays, maximise value for all and achieve the objectives of the IBC. The key amendments proposed by way of this Bill are as under:
  • Security interest under the IBC
    The Bill clarifies that Security interest shall exist only if the same has been created by virtue of an agreement between the parties and will not include a security interest created by operation of any law for the time being in force.
  • Avoidance Transaction and Fraudulent Transaction
    The Bill defines an Avoidance Transaction as a transaction referred to in Sections 43, 45, 49 and 50 and a Fraudulent Transaction or wrongful trading as the one referred in Section 66 of the IBC.
    
    The Bill also proposes that the look – back period for avoidance transactions shall start from the initiation date i.e. the date of filing of the application and not the insolvency commencement date.
  • Admission of a Petition under Section 7
    The Bill mandates admission of a Company Petition once the default is established and the other criteria under Section 7 are met. It specifically clarifies that the Adjudicating Authority shall not reject the Petition on any other ground. It further clarifies that production of record of default from Information Utility shall be considered sufficient for the purposes of existence of a default.
  • Admission of Petition under Section 10
    The Bill proposes that a Corporate Debtor seeking initiation of CIRP against itself will not be required to nominate an IRP. Instead, the Adjudicating Authority shall seek recommendation from the IBBI, in case such petition is admitted.
  • Withdrawal of CIRP under Section 12A and voluntary liquidation processes
    This bill clears the air around the timeline for withdrawal of a CIRP and proposes that no withdrawal will take place before constitution of CoC and after the first invitation for Resolution Plans of the Corporate Debtor.
    
    This Bill also inserts provision for withdrawal of voluntary liquidation process by a special resolution of the shareholders and if required, a resolution of creditors of 2/3rd in value.
  • Transfer of assets of a guarantor for the Corporate debtor
    The proposed Bill allows for transfer of assets of a guarantor in the CIRP pool when a creditor has a security interest over the asset of the guarantor and when such creditor has taken possession of the asset by enforcing its security interest.
  • Resolution Plan
    The Bill proposes that a Dissenting Financial Creditor shall be paid the amount (i) that would have been paid in the event of liquidation under Section 53 or (ii) if the amount is distributed under the resolution plan in the order of priority as per Section 53, whichever is lower.
    
    The Bill further proposes that a Resolution Plan should mandatorily provide for a monitoring committee to oversee the implementation of a Resolution Plan.
    
    The Bill also proposes that an Adjudicating Authority may, on confirming the requirements under Section 30, first approve implementation of the resolution plan and then, by a separate order, approve the manner of distribution of a resolution plan, within a period of 30 days.
    
    The Adjudicating Authority may also provide a period of 14 days to the CoC to rectify the defect in a resolution plan before rejecting it.
    
    The Bill also amends the requirement for obtaining approval of CCI, where needed, before approval of plan by CoC and instead, required such approval to be taken prior to submissions of plan to the Adjudicating Authority.
    
    The Bill also inserts the clean slate theory in the provisions and specifically provides that on approval of a Resolution Plan, the claims prior to approval of the plan stands extinguished.
  • Restoration of CIRP
    The amendment Bill proposes that in the event where no Resolution Plan has been approved or where a Resolution Plan has been rejected, the Adjudicating Authority may, on approval of 66% of the CoC, before passing an order of liquidation, restore the CIRP, which is to be concluded within a period of 120 days.
  • Liquidation process
    The Bill proposes to omit the requirement of invitation and verification of claims by Liquidator and instead, proposes to simply update the claims verified by the RP.
    
    The Bill also proposes that the CoC constituted under Section 21 will supervise the Liquidation process as it does during the CIRP period.
    
    The Bill specifies that the provisions of Sections 21 and 24 shall also apply to liquidation processes.
    
    The Bill further adds that while other classes of creditors may attend these meetings (as the present provisions require all stakeholders to attend the SCC), they shall not have any right to vote in such meetings.
    
    Further, any creditor intending to realise its security interest must inform the same to the Liquidator within 14 days, failing which, the security shall be deemed to be relinquished.
  • Distribution waterfall under Section 53
    Section 53(2) of the IBC stipulates that any contractual arrangements amongst the creditors, if disrupting the order of priority under Section 53(1) of the IBC, shall be disregarded. However, this provision did not specifically clarify whether such prohibition would also extend to inter-se arrangements between similarly placed class of creditors where the parties have agreed that one of the creditors enjoys a superior security/priority over the other creditor.
    
    The proposed amendment, by way of illustration, clarifies that the prohibition under Section 53(2) of the IBC does not extend to inter-creditor/ subordination agreements entered into between the same class of creditors.
  • Insertion of Creditor initiated Insolvency Resolution Process (CLRP)
    The Bill proposes initiation of CLRP by a notified class of Financial Creditors for a notified class of Corporate Debtors. For such initiation, the Financial Creditor will require approval of 51% of the total debt due to such notified class of Financial Creditors.
    
    The Financial Creditor is required to state its intent to initiate the process to the Corporate Debtor, who shall either make the payment of issue representation within 30 days of such intimation by the Financial Creditor. After consideration of the representation, once the Financial Creditor decides to pursue the initiation of CLRP, it shall against seek approval of 51% of the notified class of Financial Creditors.
    
    The Financial Creditor may then appoint an RP and a process similar to CIRP shall continue without any order from the Adjudicating Authority. During this process, the management of the Corporate Debtor continues to be with the board of the Corporate Debtor. However, the RP attends all the meeting and participates in the conduct of the business of the Corporate Debtor.
    
    In a CLRP, the RP can apply to the Adjudicating Authority for imposition of Moratorium similar to a CIRP.
    
    The Bill suggests that a CLRP can be converted to a CIRP when (i) No resolution plan is received or is received but rejected; (ii) the personnels of the Corporate Debtor do not co-operate with the RP; (iii) the CoC decides to convert CLRP to CIRP and seek an order from the Adjudicating Authority.
    
    The remaining provisions in CIRP relating to CoC constitution, contents and approval of resolution plans, eligibility of resolution applicants, enforcement over guarantor assets, extinguishment of past liabilities and prior offences, apply to the CLRP as well.
    
    The Bill proposes that this process must be completed within 150 days which is extendable up to 45 days.
  • Group Insolvency
    This Bill seeks to insert new chapter for Group Insolvency of Corporate Debtors who form part of Group, to enable better co-ordination and maximisation of value of these Corporate Debtors.
  • Other proposals under the Bill
    The Bill seeks to omit the fast track CIRP.
    
    The Bill also mandates stringent timelines for passing of orders by the Adjudicating Authority.
    
    The Bill proposes to do away with the imposition of interim moratorium on filing of an application for personal insolvency.
    
    The Bill proposes for setting up of an electronic portal for carrying out all the processes under the IBC.

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