INTRODUCTION
This integrated a disaggregated Indian regime into a structured and time-bound process of resolving stressed assets. 3376 companies have been resolved by IBC so far, out of which the creditors have been repaid 4.11 lakh crore by Dec 2025. It brought together a fragmented Indian system into an organized and time-bound process of resolving distressed assets.3376 companies have so far been resolved by the IBC, which have resulted in repayment of 4.11 lakh crores to the creditors by December 2025. While the Code did positively impact the banks in India, its resolution framework soon bogged down with numerous issues.
After 10 years, significant structural challenges including inordinate delays at the admission and the resolution stage, broad, uncontrolled powers of the Adjudicating Authority (AA) to reject applications, massive pending litigation before the NCLT, and substantial value erosion of the stressed asset prior to the commencement of CIRP persisted. The Parliamentary Standing Committee on Finance found that an average CIRP takes 713 days to conclude despite an outer statutory limit of 330 days, compared to the total value of avoidance-transaction applications-which numbered 1326 and aggregated to approximately 3.76 lakh crores-from which creditors recovered only 7,500 crores.
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. The president assent was on 6.4.2026. The president assent was notified in Gazette of India Extra Ordinary (Act No. 6 of 2026) and referred to herein as the ‘amendment Act’ which is widely considered by practitioners to be the most impactful amendment of the code since its inception) introduces a creditor-led resolution process, overrides legislative principles of judicial decisions, enhances the priority of government dues and provides the first formal framework of a comprehensive cross-border and group insolvency in India.
Background and Rationale for Amendment
The reasoning behind the amendment Act can be traced to the stated successes of the IBC over the first decade. Even though the code had resolved 1376 companies with creditors having recovery of 4.11 lakh crores, and had clearly influenced the banks of India for the better, the resolution process developed bottlenecks. These were compounded by litigations that emerged from the Supreme Court judgment in Vidarbha Industries Power Ltd Vs. Axis Bank Ltd., 2022, wherein it was stated that the AA has a residuary power of refusal even where there is proven default. This leads to commercial uncertainty, debtor delays (through claims of impending settlement, or future changes introduced by regulators) during the pre-moratorium stage. As indicated by the Finance Minister when introducing the bill in Parliament, the code’s purpose was not to push companies to liquidation, but instead to resolve the challenges faced by a company in innovative ways that support a stressed asset’s revival.
Mandatory Admission & Legislative Overthrow of Discretion
The amendment Act has modified Sections 7, 9 and 10 from “may” to “shall”. This mandate is for the AA to admit an insolvency application for a corporate debtor if the same is complete, establishes default and no disciplinary proceedings are pending against the proposed IRP. It will no longer have a broad residual power of refusal as established by the Vidarbha doctrine, thus empowering creditors with a tool they originally expected from the code. A further innovation is the addition to the 14-day limit for admission or rejection of an application, where the AA must now record in writing its reasons for admission, rejection or delay. This creates accountability and addresses previous delays arising from a too broad power granted to the AA. To reinforce adherence to the 14-day timeframe, a written order shall be submitted by the AA.
The Creditor-Initiated Insolvency Resolution Process (CIIRP)
The most innovative addition is the Creditor-Initiated Insolvency Resolution Process (CIIRP) via the introduction of a new chapter of the code. This represents a transition from a court-driven to a hybrid off-court resolution process that can be initiated by certain financial creditors with approval from 51% of financial creditors. There would be a 150 days period available for resolution which can be extended by 45 days where required and the management may continue to operate the business under the supervision of an interim resolution professional. This will reduce burden on the NCLTs of 7000+ admission cases presently and commence CIRP without delay to ensure maintenance of value. A major reliance, though, is on good inter-creditor cooperation since consortia lending in India has faced its own challenges.
Group Insolvency & Cross Border Framework
The Amendment Act includes enabling provisions for the Central Government to prescribe rules regarding group insolvency proceedings. This would allow interconnected companies under a single group insolvency process which may involve a joint NCLT, joint creditor committee, or joint IRP. Simultaneously, a formal cross-border insolvency framework based on the UNCITRAL Model Law on Cross-Border Insolvency has been created. This facilitates recognition of foreign insolvency proceedings and coordination with international authorities. Although regulations for each of these would be notified separately, these are widely expected to elevate India’s position significantly compared to many developed countries, where it has trailed until now.
Enhancement of Committee of Creditors role & Liquidation reforms.
The amendment Act increases the powers of the creditor’s committee in liquidation. They now have powers to monitor liquidators, even remove them with 66% of votes, to address the potential conflict of interest where the IRP is also the liquidator and to revive CIRP before the issuance of the order for liquidation by 66% within 120 days after passing of liquidation order but prior to its pronouncement. Liquidation will also have a time limit of 180 days which can be extended by 90 days in exceptional circumstances with mandatory recorded reasons from the AA within 30 days of order.
CIRP will not continue once liquidation is ordered by the AA and the resolution professional may not continue as the liquidator of the same corporate debtor.
Withdrawal restrictions & ‘Clean Slate’ Principle Withdrawal of an admission application is now restricted under Section 12A, unless it is before the Committee of Creditors is formed, no resolution plan has been invited yet and is approved by 90% of the creditors. The order to withdraw can now be passed within 30 days from filing. The “clean slate” principle has now been legislatively incorporated; an approved resolution plan extinguishes all claims against the corporate debtor except those of the promoter and guarantor. This permits the successful resolution applicant to start with a clean slate.
Prerna Bhakoria is a skilled Legal Associate at LEGALLANDS LLP, in the field of Corporate Law. She holds a BBA LLB degree with a specialization in Banking and Finance from the University of Petroleum and Energy Studies (Batch 2018-2023).
Her areas of practice in Corporate Law include drafting of legal agreements, corporate compliance, client management.
