New Delhi. The Lok Sabha on Monday passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 by voice vote. The Bill was introduced to remove procedural delays and interpretation ambiguities in the Insolvency and Bankruptcy Code (IBC) of 2016. During the passage of the bill in the Lok Sabha, the opposition created ruckus over the West Asia crisis and LPG price hike. The Parliamentary Affairs Minister explained to the opposition that these issues will be discussed again if necessary. Due to the uproar, the House proceedings were adjourned till 12:30 pm.
Union Finance Minister Nirmala Sitharaman told the House that the purpose of this amendment is not just to be a tool for debt recovery, but to help save businesses, resolve financial crisis and maintain enterprise value. The Finance Minister said that so far resolution of 1,376 companies has been facilitated and a total of Rs 4.11 lakh crore has been recovered from creditors. He said that this bill contains a total of 12 amendments, out of which 11 are based on the suggestions of the select committee and one has been introduced by the government.
The Bill introduces a new creditor-initiated insolvency process by replacing the old ‘fast-track’ measure. These include out-of-court settlements, ‘debtor in possession’ and ‘controlling creditor’ models. Its objective is to ensure a fast and flexible system for small and medium businesses.
Measures have been taken in the bill to increase timeliness. If default is established in a company, it will be mandatory to take a decision to accept the application within 14 days. This will speed up the resolution process and reduce the chances of the property value falling.
The change in definition will bring clarity to definitions like ‘service provider’ and ‘security interest’ and reduce disputes in courts. Additionally, group insolvency resolution of three or more companies can proceed simultaneously, thereby reducing complexities in group structures.
The amendment will provide an opportunity to revive businesses and will move towards a comprehensive solution and not just limited to loan recovery. Due to time bound process and clear rules, court disputes will be reduced. At the global level, this amendment is in line with international best practices.
The fast resolution process can sometimes tip the balance between the creditor and the company. The complexity of the new arrangement may prove to be a barrier for small businesses if they are unable to understand and implement the resolution processes. Apart from this, while implementing the new model, improvement in court and technical resources will be necessary, otherwise the full benefits will not be achieved.
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