FM Sitharamantables IBC Amendment Billcross-borderandgroupinsolvencyframeworksintroduced

Published in Business and Finance on Tuesday, August 12th 2025 at 12:37 GMT by moneycontrol.com
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The new Bill seeks to modify section 7 of the IBC to specify that an application for initiating the corporate insolvency resolution process by the financial creditors shall be admitted if a default exists, and no other grounds shall be considered for deciding such an application.

Finance Minister Sitharaman Introduces IBC Amendment Bill: Key Reforms on Cross-Border and Group Insolvency

In a significant move to bolster India's insolvency framework, Finance Minister Nirmala Sitharaman tabled the Insolvency and Bankruptcy Code (Amendment) Bill, 2024, in the Lok Sabha. This legislative proposal marks a pivotal step towards addressing longstanding gaps in the existing Insolvency and Bankruptcy Code (IBC), which was first enacted in 2016 to streamline corporate debt resolution. The bill introduces dedicated frameworks for cross-border insolvency and group insolvency, aiming to make the process more efficient, inclusive, and aligned with global standards. These changes are expected to enhance investor confidence, facilitate smoother resolutions in complex multinational cases, and strengthen the overall ecosystem for distressed assets in India.

At the heart of the amendment is the introduction of a cross-border insolvency framework, which has been a much-anticipated reform. Currently, the IBC lacks specific provisions to handle insolvencies involving foreign assets, creditors, or debtors, leading to jurisdictional conflicts and delays in resolution. The new framework draws inspiration from the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency, which has been adopted by over 50 countries worldwide. Under this model, Indian courts and insolvency professionals will be empowered to cooperate with foreign counterparts, recognize foreign insolvency proceedings, and provide relief to foreign representatives. This could involve staying actions against a debtor's assets in India or facilitating the repatriation of assets from abroad.

For instance, in cases where an Indian company has subsidiaries or assets overseas, the amendment would allow for coordinated proceedings, reducing the risk of asset dissipation and ensuring equitable treatment of creditors across borders. Experts believe this will be particularly beneficial for sectors like aviation, shipping, and technology, where companies often operate globally. The framework also includes safeguards to protect domestic interests, such as public policy exceptions, ensuring that foreign proceedings do not undermine Indian laws or sovereignty. By integrating these elements, the bill aims to position India as a more attractive destination for foreign investment, as it aligns with international best practices and reduces uncertainties in cross-border distress situations.

Equally important is the introduction of a group insolvency framework, which addresses the challenges posed by interconnected corporate groups. In India, many businesses operate through holding companies, subsidiaries, and affiliates, often sharing resources, debts, and operations. Under the current IBC, each entity is treated separately, leading to fragmented resolutions that can result in value erosion, prolonged timelines, and inefficiencies. The amendment proposes a mechanism to consolidate insolvency proceedings for group companies, allowing for a unified resolution plan where appropriate.

This could involve appointing a single insolvency professional to oversee the group, pooling assets and liabilities, and developing a comprehensive resolution strategy. However, the framework is designed to be flexible, permitting separate proceedings if consolidation is not in the best interest of creditors or stakeholders. For example, in high-profile cases like the Videocon or IL&FS insolvencies, which involved multiple entities, such a framework could have expedited resolutions and maximized recoveries. The bill also emphasizes procedural fairness, ensuring that inter-company claims are handled transparently and that minority creditors are not disadvantaged.

Beyond these core introductions, the amendment bill includes several other provisions to refine the IBC's operational efficiency. It proposes to extend the applicability of the pre-packaged insolvency resolution process—currently limited to micro, small, and medium enterprises (MSMEs)—to larger corporates under certain conditions. Pre-packs allow debtors and creditors to negotiate a resolution plan before formal insolvency proceedings, which can speed up the process and preserve business value. Additionally, the bill seeks to clarify the role of resolution applicants, strengthen the powers of the resolution professional, and introduce stricter timelines for various stages of the insolvency process to prevent undue delays.

Another key aspect is the enhancement of creditor rights and protections. The amendment aims to improve the information-sharing mechanism between debtors and creditors, ensuring greater transparency during the resolution process. It also addresses issues related to avoidance transactions, where fraudulent or preferential transfers made before insolvency can be clawed back to benefit the creditor pool. Furthermore, the bill proposes reforms to the adjudication process, potentially empowering the National Company Law Tribunal (NCLT) with more resources and clearer guidelines to handle the growing caseload.

The timing of this bill is noteworthy, coming amid a backdrop of economic recovery post-pandemic and increasing foreign direct investment in India. Since its inception, the IBC has resolved over 1,000 cases, leading to realizations worth billions, but challenges like delays, low recovery rates (around 30-40% on average), and complexities in multi-jurisdictional matters persist. By introducing cross-border and group insolvency frameworks, the government aims to plug these gaps, making the code more robust and adaptable to modern business realities.

Industry stakeholders have largely welcomed the move. Legal experts argue that these amendments will reduce litigation, foster better cooperation with international bodies, and ultimately lead to higher recovery rates for creditors. For businesses, especially those with global footprints, the changes could mean faster access to restructuring options without the fear of protracted legal battles. However, some concerns have been raised about the need for adequate training for insolvency professionals and judicial infrastructure to implement these frameworks effectively.

In her remarks while tabling the bill, Finance Minister Sitharaman emphasized that these reforms are part of the government's broader agenda to create a resilient financial ecosystem. She highlighted how the IBC has already transformed the credit culture in India by instilling discipline among borrowers and promoting timely resolutions. The bill is now set for debate and scrutiny in Parliament, with potential inputs from various committees before it becomes law.

Overall, the Insolvency and Bankruptcy Code (Amendment) Bill, 2024, represents a forward-looking approach to insolvency management in India. By tackling cross-border and group insolvencies head-on, it not only addresses immediate pain points but also paves the way for India to emerge as a global leader in efficient debt resolution. As the bill progresses through legislative stages, its successful implementation could significantly enhance economic stability, attract more investments, and support sustainable growth in the corporate sector. This reform underscores the government's commitment to evolving the IBC in line with dynamic economic needs, ensuring it remains a cornerstone of India's financial architecture. (Word count: 928)

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FM Sitharamantables IBC Amendment Billcross-borderandgroupinsolvencyframeworksintroduced

Finance Minister Sitharaman Introduces IBC Amendment Bill: Key Reforms on Cross-Border and Group Insolvency