By Nikunj Ohri
NEW DELHI, – India has proposed an overhaul of its bankruptcy law, including allowing financial creditors to initiate insolvency proceedings and tightening deadlines, in a bid to speed up resolutions and promote ease of doing business.
Resolutions of stressed assets in India have been delayed despite a mandated 330-day timeline under the Insolvency and Bankruptcy Code, introduced in 2016, largely due to procedural and legal hurdles. Cases often pile up for admission at the National Company Law Tribunal, quasi-judicial body that adjudicates matters related to companies.
More than 30,000 insolvency cases were pending before the National Company Law Tribunal as of March 2025, according to a December 2025 note by ratings agency ICRA. At current capacity, it could take over a decade to clear the backlog, the agency said.
The Insolvency and Bankruptcy Code (Amendment) Bill 2025, approved by the lower house of parliament on Monday, introduced a new “creditor-initiated insolvency resolution process”.
The process provides an out-of-court route to begin resolution proceedings through a public announcement after approval from lenders holding at least 51% of the debt.
The company’s existing management stays in control at the entry stage, subject to creditor oversight, while final approval of any resolution plan still lies with the insolvency tribunal.
“Once implemented, this will help ease the burden on judicial systems, promote ease of doing business and improve access to credit,” according to the bill, which now requires approval from the upper house to become law.
The new process offers a quicker alternative to the current framework while maintaining business continuity, minimising value erosion and lowering litigation, said Srinivasa Rao, senior partner at law firm Nangia Global.
TIGHTER DEADLINES, SIMPLER PROCESSES
The bill proposes tighter resolution timelines, mandating a 30-day window for approval or rejection of the final resolution plans by the insolvency court and a 180-day deadline for liquidation, among others. The existing law sets no firm approval deadline and liquidation has been open-ended.
In tribunal-led insolvency cases, the bill mandates admission once default is established and requires written reasons for delays beyond 14 days.
The bill also introduces separate frameworks for group and cross-border insolvency to prevent value erosion, and proposes to strengthen lenders’ committees during liquidation giving them statutory supervisory powers.
In addition, the amendments offer more flexibility, allowing resolution plans to include sale of individual assets rather than the entire business at one go.
(Reporting by Nikunj Ohri and Sarita Chaganti Singh in New Delhi; Editing by Janane Venkatraman)
