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IBC Amendment Bill 2025 proposes faster, broader insolvency processes - BusinessToday

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  The Bill expands the definition of resolution plans, restricts the corporate applicant's role in appointing resolution professionals, clarifies government dues priority, and limits withdrawal of insolvency applications after key stages.

IBC Amendment Bill 2025: Proposing Faster and Broader Insolvency Processes in India


The Indian government has introduced the Insolvency and Bankruptcy Code (IBC) Amendment Bill 2025, a significant legislative move aimed at streamlining and accelerating the insolvency resolution process for distressed companies. This bill, tabled in Parliament, seeks to address longstanding bottlenecks in the existing framework, making it more efficient, inclusive, and adaptable to the evolving economic landscape. At its core, the amendment proposes measures to expedite resolutions, expand the scope of insolvency proceedings, and enhance creditor protections, all while fostering a more business-friendly environment that encourages investment and economic recovery.

One of the key highlights of the bill is the emphasis on faster insolvency processes. Under the current IBC, which was enacted in 2016, the resolution process is mandated to be completed within 330 days, including litigation time. However, in practice, many cases drag on for years due to legal hurdles, procedural delays, and disputes among stakeholders. The 2025 amendment bill introduces stricter timelines and mechanisms to curb these delays. For instance, it proposes the establishment of dedicated insolvency benches within the National Company Law Tribunal (NCLT) to handle cases more swiftly. These specialized benches would be equipped with additional resources, including more judges and support staff, to ensure that pre-admission hearings and resolution plan approvals happen without unnecessary adjournments.

Moreover, the bill suggests the integration of technology-driven solutions to modernize the process. This includes the adoption of digital platforms for filing petitions, conducting virtual hearings, and tracking case progress in real-time. Such innovations are expected to reduce paperwork, minimize physical appearances, and accelerate decision-making. By leveraging artificial intelligence and data analytics, the system could predict potential delays and flag issues early, allowing for proactive interventions. This tech-forward approach aligns with the government's broader digital India initiative and is poised to make insolvency proceedings more transparent and accessible, particularly for smaller enterprises that often struggle with the complexities of the current system.

In terms of broadening the scope, the amendment bill extends the IBC's applicability to a wider range of entities and scenarios. Traditionally, the code has focused primarily on corporate debtors, but the new proposals include provisions for personal insolvency, especially for individuals and partnership firms. This expansion is crucial in a country like India, where a significant portion of businesses operate as proprietorships or small partnerships. The bill outlines a simplified framework for resolving personal insolvencies, with options for debt restructuring and fresh starts, which could help prevent cascading financial failures in the informal sector.

Another pivotal aspect is the enhancement of creditor rights and protections. The bill proposes clearer guidelines on the classification of creditors, ensuring that operational creditors—such as suppliers and employees—receive fairer treatment in resolution plans. It also introduces safeguards against fraudulent transactions by promoters or related parties, empowering resolution professionals to scrutinize pre-insolvency dealings more rigorously. This is intended to deter asset stripping and promote genuine revival efforts. Furthermore, the amendment allows for group insolvency resolutions, where multiple related companies can be addressed collectively, avoiding fragmented proceedings that often lead to suboptimal outcomes.

The bill also addresses the role of the Insolvency and Bankruptcy Board of India (IBBI) by granting it greater regulatory powers. The IBBI would be authorized to issue binding guidelines on best practices, monitor compliance, and impose penalties for violations. This strengthened oversight is expected to build confidence among investors and lenders, who have sometimes been wary of the IBC due to inconsistent implementations. Additionally, the amendment incorporates feedback from stakeholders, including lessons from high-profile cases like those involving Jet Airways and Essar Steel, where delays and legal battles highlighted systemic flaws.

Economically, these changes are timely as India navigates post-pandemic recovery and global uncertainties. By speeding up resolutions, the bill aims to unlock value from stressed assets more quickly, allowing them to be repurposed or revived under new management. This could lead to job preservation, reduced non-performing assets (NPAs) in banks, and overall financial stability. Experts believe that a more efficient IBC could attract foreign direct investment (FDI) by signaling a robust legal framework for handling business failures.

Critics, however, point out potential challenges. There are concerns that rushing processes might compromise due diligence, leading to hasty resolutions that favor certain creditors over others. Small businesses might find the expanded scope overwhelming without adequate support mechanisms. The bill also needs to balance speed with fairness, ensuring that environmental and social considerations are not overlooked in corporate revivals.

Overall, the IBC Amendment Bill 2025 represents a forward-looking reform that builds on the successes of the original code, which has already resolved over 5,000 cases and recovered substantial dues. If passed, it could position India as a leader in insolvency reforms, comparable to global standards in countries like the UK and Singapore. The government's push for these changes underscores its commitment to ease of doing business, with the ultimate goal of creating a resilient economy where innovation thrives and failures are managed efficiently. As the bill progresses through parliamentary debates, stakeholders will watch closely for refinements that address any gaps, ensuring it delivers on its promise of faster, broader, and more equitable insolvency processes.

Read the Full Business Today Article at:
[ https://www.businesstoday.in/latest/economy/story/ibc-amendment-bill-2025-proposes-faster-broader-insolvency-processes-489219-2025-08-13 ]