Ten years in, the Insolvency and Bankruptcy Code has finally been amended to close gaps that case law had quietly opened up in it. The IBC Amendment Act, 2026, in force from 26 May 2026, does three things that matter to anyone advising creditors: it takes the discretion back out of admission, it widens the window for clawing back value that left a company before insolvency was formally declared, and it hands financial creditors a new route into a distressed company that doesn't need a Section 7 petition at all. This piece walks through each change and the litigation that made it necessary.
Introduction
Anyone who has filed or defended a Section 7 petition since 2022 knows the name Vidarbha. What was supposed to be a mechanical check is there a debt, has it defaulted turned, after Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 32, into something closer to a mini-trial on the corporate debtor's wider commercial situation. NCLTs started entertaining arguments about pending arbitral claims, counter-recoveries, and project viability at a stage the statute never intended any of that to matter. Admissions that should have taken weeks began taking years, and every debtor with a decent lawyer learned to build a Vidarbha-shaped defence around whatever facts they had.
The same kind of drift showed up elsewhere in the Code. Resolution professionals chasing preferential or undervalued transactions found that a related-party diversion routed through an unrelated intermediary, timed just outside the shorter look-back window, could slip past scrutiny not because the transaction was genuine, but because the statute's own timelines had a gap in them. And Section 12A withdrawals, meant to be a real settlement mechanism, were increasingly being used by promoters to walk a company back out of insolvency once the threat of CIRP had already done its job of forcing creditors to the table.
Parliament didn't need to rewrite the Code to fix any of this. It needed to take back the ground that adjudication had drifted onto over the past decade, and put the certainty back into the statute's text. That's essentially what the IBC Amendment Act, 2026 does. For anyone advising financial creditors, corporate debtors, or resolution professionals, three changes deserve real attention: the codified 14-day admission timeline, the restructured avoidance transaction look-back period, and the entirely new Creditor-Initiated Insolvency Resolution Process. Each one has a direct lineage in a specific line of cases or a specific structural gap that the pre-amendment Code left open, and that's the order we'll take them in.
I. Mandatory Admission Within 14 Days: Codifying What the Supreme Court Kept Re-Affirming
Where it started
The starting point has always been Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407 one of the earliest Supreme Court pronouncements on Section 7, and one that set the tone for how the admission stage was meant to work. The Court was clear that once a financial creditor shows a debt and a default, the Adjudicating Authority's job at that stage is essentially over; it doesn't get into the corporate debtor's larger commercial troubles or whether the default was somehow excusable. For the first few years of the Code's life, that's roughly how NCLTs treated Section 7 narrow, mechanical and fast.
Then came Vidarbha
That changed in July 2022. Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 32 involved a power company that owed Axis Bank money but was also sitting on an APTEL award worth roughly ₹1,730 crore that it hadn't yet recovered. Vidarbha argued it could pay its dues once that award came through, and that Section 7(5)(a) which says the Adjudicating Authority "may" admit an application gave the NCLT room to look at that. The Supreme Court agreed, reading "may" as genuinely discretionary and holding that the existence of debt and default only gives a financial creditor the right to apply, not an automatic entitlement to admission.
On its own facts, that outcome is defensible Vidarbha had a real, adjudicated, recoverable counter-claim larger than the debt itself. The trouble is what happened next. Every corporate debtor with any kind of pending litigation, however weak, started running the Vidarbha argument. NCLTs across the country took wildly different views on how far the discretion extended, and admissions that should have been resolved within the statute's own 14-day timeline started stretching into years of contested hearings. What was meant to be a narrow, fact-specific exception effectively became a fresh line of defence available to almost any defaulting debtor with a lawyer willing to try it.
The Court walks it back
The Supreme Court itself seemed to recognise the problem fairly quickly. In M. Suresh Kumar Reddy v. Canara Bank & Ors., (2023) 8 SCC 387, decided in May 2023, Justice Abhay S. Oka's bench went back to basics: once debt and default are established, the NCLT is bound to admit the Section 7 application, and Vidarbha cannot be read as displacing the position taken earlier in Innoventive Industries case. The Court pointed to its own order dismissing the review petition in Vidarbha as confirmation that the ruling was confined to that case's unusual facts and was never meant to become a general rule.
That didn't fully settle things, but it set the direction. The most recent word on this and one worth having in your back pocket for any current Section 7 matter is Power Trust (Promoter of Hiranmaye Energy Ltd.) v. Bhuvan Madan (Interim Resolution Professional of Hiranmaye Energy Ltd.) & Ors., Neutral Citation 2026:INSC:166, decided on 18 February 2026 by a bench of CJI Surya Kant and Justices Joymalya Bagchi and Vipul M. Pancholi. REC Ltd. had lent over ₹2,000 crore to Hiranmaye Energy for a thermal power project in West Bengal; the account turned NPA, restructuring proposals were floated but never actually implemented because the pre-conditions were never met, and the promoter tried to resist CIRP on the ground that a settlement was still on the table. The Court wasn't having it it held that the inquiry at admission is confined to whether a debt is due and payable and nothing more, and treated Vidarbha as, by now, a narrow and largely spent exception.
What the amendment does
The IBC Amendment Act, 2026 takes this entire decade of back-and-forth and simply writes the Innoventive/Suresh Kumar Reddy position into the statute itself, so it no longer depends on which bench you draw. Once debt and default are shown, admission under Section 7 is now mandatory within 14 days, and if the NCLT takes longer than that, it has to record its reasons for the delay on file. There's no more room for a debtor to import broader commercial arguments pending arbitral claims, project viability, settlement talks into what is meant to be a threshold inquiry. Parliament has effectively closed the door that Vidarbha opened, and done it in a way that doesn't depend on judicial reaffirmation case after case.
What this means in practice
For financial creditors, this is straightforwardly good news Section 7 petitions should move faster, and the "manufacture a Vidarbha defence" playbook loses most of its force. For corporate debtors and their counsel, it means admission-stage strategy has to shift: resisting CIRP now has to happen through genuine disputes over the existence of debt or default itself, not through side arguments about the debtor's broader financial position. And for NCLTs, the amendment removes a fair amount of the interpretive burden that Vidarbha's ambiguity had created though it also means any delay beyond 14 days will now be a matter of record, which is likely to invite its own scrutiny in appeal.
II. Avoidance Transactions: A Wider Net, and Why It Was Needed
The baseline: Anuj Jain
If there's one case every insolvency litigator cites on preferential transactions, it's Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Limited & Ors., (2020) 8 SCC 401, decided on 26 February 2020 by Justices A.M. Khanwilkar and Dinesh Maheshwari (Civil Appeal Nos. 8512–8527 of 2019). The facts are fairly well known in this line of work: Jaypee Infratech had mortgaged its own land over 850 acres along the Yamuna Expressway as security for loans that were actually taken by its holding company, Jaiprakash Associates. When Jaypee Infratech went into CIRP, its Resolution Professional sought to avoid those mortgages as preferential and undervalued transactions under Sections 43 and 45.
The Supreme Court used the case to lay down what's become the standard two-limb test for a preferential transaction: there has to be a transfer of property or an interest in it, for the benefit of a creditor, surety, or guarantor, on account of an antecedent debt or liability, and that transfer has to leave the recipient better off than they'd have been under a Section 53 liquidation waterfall. Importantly, the Court also confirmed how the look-back period worked at the time two years for transactions with related parties, one year for everyone else and treated the JAL lenders as related-party beneficiaries precisely because the arrangement let JAL raise far more financing than it otherwise could have.
Where the gap was
That differentiated window made sense in principle related parties are assumed to carry a higher risk of collusion, so they get a longer look-back. In practice, though, it created an obvious workaround. A transaction structured to route value through an intermediary that wasn't technically a "related party," but was still connected enough to matter commercially, only had to clear a one-year window to be safe from clawback. Given how far in advance financially distressed companies often start moving assets, a year isn't a particularly long runway to hide behind and resolution professionals kept running into transactions that were clearly designed to exploit exactly this gap.
There was a second, quieter problem too. The look-back period was counted backward from the date of admission of the CIRP application not from the date the application was actually filed. Given how long admissions could take under the Vidarbha regime discussed above, that gap between filing and admission became, in effect, a second blind spot: a corporate debtor could see the petition coming, know admission would take a while, and still have time to move assets in the interim without those transactions falling inside the look-back window at all.
What the amendment changes
The Amendment Act addresses both problems directly. First, it does away with the differentiated look-back periods under Sections 43 and 45 related party or not, the window is now uniformly two years. Second, and this is the part worth reading closely, the relevant period is no longer pegged only to the admission date; it's understood to run from the date the insolvency application is filed and extend up to admission, which closes the gap that a delayed admission used to create. Practitioners should treat this as still-developing ground, though the amendment's drafting on this point is being read slightly differently across early commentary, and IBBI regulations are expected to firm up the mechanics.
There's a third change that's easy to miss but matters just as much operationally: a new Section 47 now lets creditors directly apply for an avoidance order if the Resolution Professional or liquidator has the information to flag a preferential, undervalued, extortionate, or fraudulent transaction and simply doesn't act on it. If the Adjudicating Authority is satisfied the RP sat on it, it can direct the IBBI to open disciplinary proceedings against that RP. Under the old scheme, avoidance applications were effectively the RP's call alone creditors had no independent route in if the RP either missed something or chose to look the other way. That's no longer true.
Alongside this, Section 26 has also been widened so that fraudulent trading and wrongful trading applications under Section 66 are now treated the same way undervalued-transaction applications always were pursuing them doesn't hold up or get absorbed into the CIRP itself, and an explanation has been added clarifying that these proceedings survive even after the CIRP or liquidation formally concludes. That matters practically: a resolution plan being approved, or a company being dissolved, no longer draws a line under a live avoidance claim.
What this means in practice
For resolution professionals, the practical takeaway is straightforward the transaction universe you need to review just got materially larger, and the cost of not acting on a red flag has gone up now that creditors have their own route in under Section 47. For secured lenders and anyone advising a company that's already showing signs of distress, this is the moment for a forensic look back at related-party and connected-party dealings over the last two years, not one. And for corporate debtors and promoters, the room to structure a transaction just outside the old one-year window to avoid it being unwound has effectively closed.
III. CIIRP: A Genuinely New Animal
Unlike the first two changes, which correct drift that had crept into existing provisions, the Creditor-Initiated Insolvency Resolution Process is something the Code has never had before. It sits in a brand-new Chapter IV-A, Sections 58A to 58K, and it works on a completely different logic than Section 7 or Section 9 ever did.
How it actually works
Under the ordinary CIRP route, a financial or operational creditor files an application, the NCLT applies its mind (now, post-amendment, within 14 days), and only once the Tribunal admits the petition does the moratorium kick in and a Resolution Professional take over management. CIIRP skips the adjudication step at the front end entirely. Eligible financial creditors and eligibility here is restricted to notified classes of financial institutions, not any creditor off the street holding at least 51% of the financial debt by value can trigger the process by giving the corporate debtor 30 days' notice and an opportunity to make representations. If that doesn't resolve the default, the creditors appoint an insolvency professional as RP, the RP makes a public announcement, and the process is deemed to have commenced from that announcement no NCLT order needed to get it moving.
The other structural departure is what happens to management. In a normal CIRP, the moratorium under Section 14 kicks in automatically on admission and the existing board effectively loses control to the RP. CIIRP doesn't work that way. It's a debtor-in-possession model the existing management stays in the driver's seat, subject to oversight from the creditor-appointed RP, and the moratorium isn't automatic; the RP has to actually go to the NCLT and apply for one if it's needed. Commentators have drawn a comparison to the Chapter 11 debtor-in-possession framework in the US, and there's something to that, though it's worth being careful not to push the analogy too far CIIRP is built inside India's existing statutory scheme, with its own eligibility gates and its own relationship to the rest of the Code, not a wholesale import of the American model.
There are guardrails built in specifically to stop CIIRP from becoming a parallel, competing track to ordinary CIRP. Section 11 has been amended so that if CIRP has already been initiated against a company under Sections 7, 9, or 10, CIIRP can't be triggered against the same debtor, and the reverse holds too you can't run both simultaneously. A company that's already been through CIRP, a pre-pack, or CIIRP itself in the preceding three years is also off the table, which is a deliberate check against creditors using the mechanism repeatedly against the same debtor as a pressure tactic. And CIIRP itself isn't a dead end the framework contemplates conversion into a full CIRP where the lighter-touch process doesn't get the job done.
One smaller but practically important addition sits alongside this: a new clause in Section 30(2) now requires any resolution plan to provide for payment to financial creditors who voted against it, addressing a gap that dissenting creditors have long complained about under the ordinary CIRP regime as well.
It's also worth flagging that this chapter is still being operationalised the IBBI has only recently put out a discussion paper on the CIIRP Regulations, 2026, and a fair amount of the mechanics (which categories of debtor qualify, which classes of financial institution can initiate, the exact procedural timeline) is left to be notified by the Central Government rather than fixed in the Act itself. So while the architecture is now in the statute, the operational detail is still a work in progress.
What this means in practice
For financial creditors particularly banks and NBFCs likely to fall within the notified eligible classes this is a genuinely new pre-litigation lever: a way to force a distressed borrower's hand without going through the NCLT at all, at least at the initiation stage. It rewards creditors who move early, before a default deteriorates into full-blown insolvency. For corporate debtors and promoters, a CIIRP notice needs to be treated very differently from a Section 7 petition there's no adjudicatory gatekeeper to persuade at the outset, so the 30-day representation window is likely to be the most important stage of the entire process, not a formality to get through before the real fight begins in front of the NCLT.
Practical Implications: What This Means for Each Stakeholder
For Financial Creditors
The overall direction of this amendment is unmistakably in their favour, but that doesn't mean it's a free pass to relax on drafting or diligence. The 14-day admission timeline only helps if your Section 7 application is airtight on debt and default at the time of filing with the Vidarbha defence largely foreclosed, corporate debtors are going to shift their resistance to genuinely disputing whether a debt exists or a default occurred at all, so expect more front-loaded fights on documentation and account classification rather than on commercial hardship. On the avoidance side, the wider two-year look-back is only useful if someone is actually reviewing the debtor's transaction history that far back this is the moment to build that review into standard pre-CIRP and CIIRP diligence rather than leaving it to the RP to discover later. And CIIRP itself is worth taking seriously as a genuine strategic option, not just a theoretical one, particularly for consortium lenders who can realistically clear the 51% threshold it's considerably cheaper and faster than a full NCLT-driven CIRP if the goal is to force restructuring talks rather than immediately displace management.
For Corporate Debtors and Promoters
The room to manoeuvre has narrowed on every front covered in this piece. Delay-based defences at admission are largely gone; transaction structuring around the old look-back windows no longer works; and a CIIRP notice can arrive without any NCLT order preceding it, which means the 30-day representation window is now genuinely high-stakes rather than a formality. If your client is showing early signs of distress, the practical advice has to change too, get ahead of a CIIRP notice by engaging with lenders proactively, and treat any transaction involving related parties or connected intermediaries over the last two years as something that could face scrutiny, not just the last twelve months.
For Resolution Professionals
Two changes affect their exposure directly. The wider avoidance window means a larger transaction universe to review, and the new Section 47 route means creditors can now go around you if you don't act on red flags which raises the practical stakes of a thorough Section 43/45/66 review considerably, given that inaction can now trigger disciplinary referral to the IBBI. If they're likely to be appointed under CIIRP specifically, the debtor-in-possession structure also changes their role in a way the traditional CIRP never asked of RPs they're overseeing management rather than displacing it, which is a materially different job and one the IBBI's forthcoming CIIRP Regulations will need to spell out in far more procedural detail than the Act itself provides.
Conclusion
None of the three changes examined here invent new insolvency law from scratch. What they do, more usefully, is take positions the Supreme Court had already arrived at through years of litigation that admission under Section 7 is not a discretionary exercise once debt and default are shown, that avoidance transactions were slipping through timing gaps the statute itself created and lock them into the text, so the next distressed company doesn't have to relitigate settled ground. CIIRP is the genuine outlier of the three: an entirely new, out-of-court mechanism without a direct precedent in the pre-amendment Code, and also the one still most dependent on regulations the IBBI hasn't finished drafting.
For litigators on both sides of the table, the near-term work is less about mastering brand-new doctrine and more about recalibrating strategy around doctrine that's now settled by statute rather than by precedent that could, in theory, always shift again. The one part of this amendment genuinely worth watching closely over the next few months is the CIIRP Regulations until the Central Government notifies the eligible classes of debtors and creditors, Chapter IV-A remains a framework with real teeth on paper but limited practical bite on the ground.
Cases Cited
- Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407
- Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 32
- Suresh Kumar Reddy v. Canara Bank & Ors., (2023) 8 SCC 387
- Power Trust (Promoter of Hiranmaye Energy Ltd.) v. Bhuvan Madan (Interim Resolution Professional of Hiranmaye Energy Ltd.) & Ors., Neutral Citation 2026:INSC:166
- Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Limited & Ors., (2020) 8 SCC 401
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.
