The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 marks one of the most sweeping overhauls since the Code’s inception in 2016. It touches the very core of insolvency practice—definition clauses, procedural timelines, withdrawal conditions, avoidance proceedings, resolution plan distribution, liquidation processes, and, for the first time, introduces a creditor-initiated insolvency resolution process.
In the following analysis, we break down the critical amendments, explaining what has changed and why it matters.
1. Clarification on ‘Security Interest’ – Section 3
Amendment: Security interest will now exist only if it arises from a consensual agreement or arrangement between parties, not merely by operation of law.
Implication: This narrows the scope, potentially excluding statutory liens from the definition unless contractually agreed. It will prevent misuse of automatic statutory charges in insolvency priority disputes.
2. Introduction of ‘Service Provider’ – Section 3(31A)
Amendment: New definition includes insolvency professionals, agencies, information utilities, and other notified persons.
Implication: Brings clarity and regulatory coverage over all professionals engaged in the insolvency ecosystem.
3. Consolidation of Avoidance Transactions – Section 5(2A)
Amendment: ‘Avoidance transaction’ is now defined collectively for Sections 43, 45, 49, and 50.
Implication: Ensures uniform treatment and procedural clarity for challenging suspect transactions.
4. Procedural Streamlining in Admission of Applications – Sections 7, 9, and 10
Amendments:
- 14-day disposal limit reinforced, with mandatory reasons for delay.
- Adjudicating Authority cannot reject applications on extraneous grounds if statutory requirements are met.
Implication: Reduces judicial delays, increases predictability for creditors.
5. Stricter Withdrawal Rules – New Section 12A
Amendment: Withdrawal barred before constitution of CoC and after first invitation for resolution plan.
Implication: Curtails tactical withdrawals that disrupt CIRP timelines.
6. Moratorium Extended to Guarantees – Section 14
Amendment: Clarifies moratorium applies to actions by sureties under guarantees.
Implication: Protects corporate debtor’s restructuring efforts from backdoor recovery attempts.
7. Liquidation Supervised by CoC – Section 21(11)
Amendment: CoC now supervises liquidation conduct; voting rights not given to specified non-voting attendees.
Implication: Strengthens creditor control during liquidation.
8. Protection of Licences/Permits in Approved Plans – Section 31(5)
Amendment: Licences, permits, concessions remain valid if obligations met.
Implication: Enhances going-concern value and investor confidence.
9. Distribution to Dissenting Financial Creditors – Section 30(2)(ba)
Amendment: Mandates fair and equitable distribution, not less than liquidation value or priority value.
Implication: Addresses litigation over discriminatory payouts.
10. Restoration of CIRP Before Liquidation – New Section 33(1A)
Amendment: CIRP can be revived once before liquidation order, for up to 120 days.
Implication: Offers last-chance restructuring window, reducing premature liquidations.
11. Replacement of Liquidator – New Section 34A
Amendment: CoC empowered to replace liquidator mid-process by 66% vote.
Implication: Accountability mechanism for liquidation performance.
12. Removal of Sections 38–42
Amendment: Old claim verification and admission provisions omitted; duties integrated into Section 35.
Implication: Simplifies claim handling; aligns with speedier processes.
13. Creditor-Initiated Insolvency Resolution Process – New Chapter IV-A
Amendment: Allows specified financial creditors to initiate CIRP without CoC constitution delays, under defined thresholds.
Implication: Fast-track tool for banks/financial institutions; particularly relevant for MSMEs and low-asset companies.
14. Strict Timelines Across the Board
Amendment: Multiple provisions now require orders within fixed days (14/30/150) and written reasons for delays.
Implication: Curtails open-ended adjournments that have plagued IBC proceedings.
Conclusion
The IBC Amendment Bill, 2025 signals a decisive legislative intent—speed, clarity, creditor empowerment, and procedural discipline. From protecting licences post-resolution to introducing a creditor-led process, the amendments aim to make insolvency resolution swifter, more transparent, and commercially viable.
However, the ultimate success will depend on judicial adherence to timelines and consistent interpretation across NCLT benches.