Insolvency law gets sharper teeth with new amendments

New Delhi: The Lok Sabha on Monday passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, aimed at accelerating insolvency resolutions and strengthening India’s bankruptcy framework.

Piloting the Bill, Finance and Corporate Affairs Minister Nirmala Sitharaman said the proposed 12 amendments will help maximise value for stakeholders, improve governance, and address persistent delays caused by litigation.

A key provision mandates that insolvency applications be admitted within 14 days once a default is established. Appeals before the National Company Law Appellate Tribunal (NCLAT) must be resolved within three months, while adjudicating authorities are required to approve or reject resolution plans within 30 days.

The Bill replaces the underutilised fast-track process with a creditor-initiated insolvency framework that allows out-of-court initiation.

This model combines debtor-in-possession with creditor-in-control, enabling existing management to continue with safeguards, under defined timelines. The new process will have a compressed 150-day resolution period. To curb delays, the legislation introduces penalties ranging from Rs1 lakh to Rs2 crore for filing frivolous or vexatious applications. Sitharaman identified excessive litigation as the primary reason for delays and said the amendments aim to prevent misuse of the process.