The Parliament on Wednesday passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2026, after the Rajya Sabha also approved the sweeping Insolvency Code Reforms to Accelerate Resolution Process, ushering in a major overhaul of India’s insolvency regime.
Cleared after scrutiny by a Select Committee, the legislation is aimed at speeding up resolution processes, enhancing creditor control, and aligning the system with global best practices. The Bill was passed in the Lok Sabha on Monday.
First introduced on August 12, 2025, the Bill seeks to amend the Insolvency and Bankruptcy Code, 2016, which established a unified and time-bound mechanism for handling insolvency across companies, partnerships, and individuals. The Code has been a cornerstone of India’s financial reforms, addressing cases where entities are unable to meet their debt obligations.
The latest amendments target delays and procedural bottlenecks that have emerged over time. Finance Minister Nirmala Sitharaman said the changes are intended to make the framework more efficient and effective, with a focus on reducing delays and maximising value for stakeholders.
During discussions in the House, Sitharaman reiterated that the Code is designed as a resolution mechanism, not a tool for debt recovery. She underlined its role in reviving viable businesses, preserving enterprise value, and protecting employment.
A central feature of the Bill is the introduction of the creditor-initiated insolvency resolution process (CIIRP), which offers an alternative to the existing corporate insolvency resolution process (CIRP). Under this system, financial creditors holding at least 51% of the debt can initiate proceedings while allowing existing management to continue operations under supervision. Debtors are given a minimum of 30 days to respond and can challenge the proceedings before the National Company Law Tribunal, which retains the authority to convert the case into a standard CIRP if necessary.
The Bill removes the fast-track insolvency route for startups and smaller firms, while continuing and refining pre-packaged insolvency mechanisms for MSMEs. It also introduces stricter timelines, requiring CIIRP cases to be completed within 150 days, with a possible extension of 45 days.
In a significant step towards reform, the legislation empowers the government to frame rules for group insolvency, enabling coordinated resolution of stressed corporate groups. It also establishes a cross-border insolvency framework to handle cases involving overseas assets or creditors more efficiently, thereby boosting investor confidence.
The Committee of Creditors (CoC) has been given greater authority, including oversight of liquidation proceedings and the power to replace liquidators. Timelines for liquidation have been tightened, mandating tribunal orders within 30 days and completion within 180 days, extendable by 90 days. Voluntary liquidation processes must be concluded within one year.
To curb misuse, the Bill introduces penalties ranging from ₹1 lakh to ₹2 crore for filing frivolous or vexatious cases before bodies such as the NCLT and the Debt Recovery Tribunal. It also mandates that tribunals admit cases where default is established and procedural requirements are met, and provide written reasons for delays beyond 14 days.
The Select Committee proposed several safeguards, including stronger oversight of resolution professionals, improved regulatory supervision, and clearer rules for cross-border cases. It also recommended defined timelines for appeals and lower voting thresholds to expedite decision-making.
Additionally, the Committee suggested decriminalising minor technical offences and replacing them with civil penalties to reduce litigation and improve efficiency. It emphasised the need for greater transparency and stronger governance standards within the CoC.
Sitharaman noted that the amendments are the result of extensive consultations over the past three years with stakeholders and experts. She highlighted the importance of periodically updating economic legislation to reflect evolving market realities and lessons from implementation.
The passage of the Bill forms part of a broader effort to strengthen India’s financial ecosystem, improve credit flow, and enhance ease of doing business. By introducing creditor-led mechanisms, group insolvency provisions, and cross-border frameworks, the reforms aim to create a more efficient, flexible, and modern insolvency system.