AMENDMENTS TO THE IBC, 2016

Nearly a decade after the Insolvency and Bankruptcy Code, 2016 ("IBC") came into force, the Insolvency and Bankruptcy Code (Amendment) Bill, 2026, received the assent of the President of India on 6^th  April 2026 and shall come into force on such date as the Central Government notifies the same in the Official Gazette. The Amendment Bill is being introduced to resolve certain practical challenges that are causing delays at the admission stage, uncertainty in distribution outcomes, increasing litigation, and issues in implementation of an approved resolution plans.

The critical amendments as introduced vide the Amendment Bill of 2026 are as follows:

1. Admission of Section 7 Application

The Amendment now makes it mandatory for the Adjudicating Authority to admit a Section 7 Petition within 14 days of receipt of the application on the basis that there is a debt and a default and there is no disciplinary proceedings against proposed Interim Resolution Professional. If the above two conditions have been complied with, no other ground shall be considered by the Adjudicating Authority to reject an application.

Further, a record of default from an information utility is expected to be treated as sufficient proof. 

This will reduce disputes at the initial stage and make the process more time efficient.

2. Withdrawal of the Insolvency Process

Now the withdrawal of the Insolvency Process shall be permitted only after constitution of CoC and before the first invitation for submission of a Resolution Plan. Further, an application can only be permitted to be withdrawn with an approval of 90% members of the Committee of Creditors.

3. Meaning of Security Interest

An explanation has been added to the definition of ‘Security Interest’- “that the security interest shall exist only if it creates a right, title or interest or a claim to a property pursuant to an agreement or arrangement, by the act of two or more parties, and shall not include a security interest created merely by operation of any law for the time being in force”;

Thus, the statutory charges of Govt. dues will not have a status of secured creditor under IBC.

4. Re-Initiation of CIRP

If no Resolution Plan has been received or a Resolution Plan has been rejected then the Adjudicating Authority may restore the CIRP if an application by not less than 66% of the voting share of the CoC is filed for the same. In case no Resolution Plan is received, the Adjudicating Authority may restore the CIRP from the initial stages and in case of rejection of the Resolution Plan from the stage of invitation of Resolution Plans. This restoration would be one time with a maximum period of 120 days to complete the process. Further, the Adjudicating Authority can also reinstate the CIRP if the provisions of an approved Resolution Plan have been contravened.

5. Amendments with respect to submission, approval and implementation of Resolution Plans

There are several measures for stream lining the process of submission, approval and implementation of Resolution Plan:

1. Multiple Resolution Plans for the Corporate Debtor including sale of assets can now be proposed. This will provide stakeholders better options to resolve the Corporate Debtor.
2. The Adjudicating Authority would first approve the Resolution Plan and thereafter separately within 30 days approve the manner of distribution in the Resolution Plan.
3. The Adjudicating Authority before rejecting a Resolution Plan will give notice to the Committee of Creditors to rectify any defects in the Resolution Plan.
4. The Adjudicating Authority will be required to pass an order on the application filed for the approval of the Resolution Plan within 30 days failing which it will be required to record its reason.
5. The licenses, approvals and Govt. concessions by the Central Govt., State Govt., Local Authority, Sectoral Regulator or any other Authority available with the Corporate Debtor will not be suspended or terminated during the subsistence of the remaining period of such grants or rights, as long as the Corporate Debtor or the Resolution Applicant is complying with the terms and conditions of such grants and rights.
6. On approval of a Resolution Plan, there will be prohibition or initiation or continuation of any proceedings for past Claims against the Corporate Debtor. However, any proceedings against the promoters can continue.

6. Amendments with respect to Liquidation Process

1. The Resolution Professional will not eligible to become the Liquidator. The Liquidator would be appointed by the Adjudicating Authority.
2. The Committee of Creditors will now supervise the conduct of the Liquidation Process.
3. The other Creditors may participate in the Liquidation Process as non-voting members.
4. The Liquidator will not invite or verify claims and Section 38 to 42 have been deleted.
5. The Liquidation Process would be for a period of 180 days which can be extended further by a period of 90 days.
6. The voluntarily Liquidation Process will have to be completed within one year.
7. The Liquidator will be permitted to initiate or continue legal proceedings on behalf of Corporate Debtor with approval of the Adjudicating Authority.
8. The Committee of Creditors can replace the Liquidator by a Resolution of 66% voting share.
9. The Committee of Creditors will have the power to resolve to directly dissolve the Corporate Debtor.
10. A Creditor will be a secured creditor only to the extent of the value of their security relinquished in the liquidation estate.
11. Central or State Govt. dues will not be entitled to the priority of secured creditors.
12. Any creditor intending to realise their security outside the liquidation process will have to inform the Liquidator of such action within 14 days failing which the security shall be deemed to have been relinquished to the Liquidation estate.
13. Any asset which has been charged to more than one lender can only be kept out of the liquidation estate on approval of 66% of value of creditors having charge on the said asset.
14. Any creditor intending to realise its security outside the liquidation process will have to deposit its pro-rata share of CIRP cost, liquidation cost and worker dues with the liquidator from the proceeds of the sale
15. Any asset of the Personal Guarantor or the Corporate Guarantor on which possession has been taken by any Creditor can be sold as a part of the Corporate Insolvency process of the Corporate Debtor subject to approval of the Committee of Creditors. However, if the Corporate Guarantor is undergoing CIRP or Liquidation then such sale would require the approval of the Committee of Creditor of the Corporate Guarantor and the proceeds of sale shall go to the CIRP or Liquidation of the Corporate Guarantor. Similarly in case of a personal guarantor undergoing insolvency or bankruptcy proceedings and the assets has been surrendered to the Bankruptcy Trustee, the Asset can be transferred on approval of ¾ of the Creditors with the proceeds going to the Insolvency or Bankruptcy Process.

7. Amendments in Look Back period

The lookback period for preference, undervalued and extortionate credit transactions is extended from the filing date of the application instead of the admission date.

8. Strict Timelines for Adjudicating Authority and Appellate Tribunal

1. Withdrawal of CIRP – within 30 days of application.
2. Liquidation Order - within 30 days of application.
3. Dissolution Order - within 30 days of application.
4. Disposal of Appeals – within 3 months.

Further, for filing of frivolous litigations the Adjudicating Authority may impose a penalty of Rs. 1 lakh to Rs. 2 Crores on any person initiating such proceedings.

9. Creditor-Initiated Insolvency Resolution Process (CIIRP)

The Amendment Act introduces a new Resolution Process being Creditor-Initiated Insolvency Resolution Plan (CIIRP). The main features of CIIRP are as follows:

1. CIIRP can be initiated against Corporate Debtors belonging to notified levels of assets or income or class.
2. CIIRP cannot be initiated against the Corporate Debtors who is undergoing Insolvency Process or Liquidation. Further, CIIRP cannot be initiated against the Corporate Debtor which has undergone CIIRP or pre-packaged insolvency or completed CIRP during the period of three years preceding the creditor-initiated insolvency commencement date.
3. A Financial Creditor can initiate CIRP against the Corporate Debtor belonging to a notified class of creditor after taking approval of 51% of such class of creditors.
4. Before initiation, the creditor is expected to provide a notice period of approximately 30 daysto the Corporate Debtor, allowing an opportunity for resolution. If unresolved, the process may be triggered.
5. On the basis of the response of the Corporate Debtor, the Financial Creditor can appoint the Resolution Professional within 30 days of receiving such response.
6. The Resolution Professional will make a public announcement of initiation of CIIRP and inform the Adjudicating Authority and IBBI.
7. No Application for CIIRP may be filed or admitted against the Corporate Debtor after the public announcement.
8. The Corporate Debtor can challenge the initiation of CIIRP before the Adjudicating Authority and the Adjudicating Authority may declare the CIIRP as void if no default has occurred. The Adjudicating Authority can also convert CIIRP into CIRP if there is a default but, the initiation of CIRP is not in compliance of the Code.
9. The CIIRP is to be completed within a period of 150 days, which can be extended by 45 days by the Adjudicating Authority on an approval by the CoC by 66% of value.
10. The Resolution Professional as in the case of CIRP would invite claims, prepare information memorandum, invite resolution plans and file applications for avoidance/ fraudulent transactions.
11. The management of affairs of the Corporate Debtor continues with the existing Board. The Resolution Professional will attend all Board Meeting and Committee Meeting and has a right to reject any Resolutions passed in such meetings.
12. In the case of CIIRP there is no automatic moratorium on initiation of the same. However, moratorium can be ordered by the Adjudicating Authority on an application filed by the Resolution Professional.
13. If no Resolution Plans have been received within the specified period or a Resolution Plan has been rejected or the Directors/ Personnel of the Corporate Debtor do not cooperate with the Resolution Professional, the Adjudicating Authority shall pass an order to convert CIIRP to CIRP. The Committee of Creditors can also at any point during the process decide and vote to convert the CIIRP to CIRP and seek an order from the Adjudicating Authority for the same.
14. All other provisions of the CIRP would apply to the CIIRP.

10. Group Insolvency

This will apply to two or more Corporate Debtors in a group who are undergoing Insolvency Process. The rules with respect to how group insolvency would operate will be legislated by the Central Government. Such rules may provide for a common bench for all such Corporate Debtors, transfer of matters to the same Bench, Common Resolution Professional and Common Committee of Creditors etc. 

11. Cross Border Insolvency

The Amendment Act provides for the Central Govt. to prescribe rules for conducting cross border insolvency proceedings including the process for recognition of proceedings, granting relief, judicial cooperation, assistance and coordination in connection with such proceedings, for such class or classes of debtors or corporate debtors involving such countries or territories outside India.

12. Personal Insolvency Proceedings

The Interim Moratorium Available of filing an Application for initiating Personal Insolvency Process or Bankruptcy Process will not be available for Personal Guarantors to Corporate Debtor.

13. Fast Track Insolvency

The Fast track Corporate Insolvency Resolution Process has been omitted.

The Amendment Act addresses the interpretational issues that have arisen through various judicial decisions and also deals with the present difficulties and delays faced in the Insolvency Process.

Once brought in force, the proposed amendment shall further strengthen the insolvency regime in India.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.