Union Cabinet approves key changes to IBC and Companies Act 2013

The Union Cabinet approved amendments to the Insolvency and Bankruptcy Code (IBC), 2016 and the Companies Act, 2013, following recommendations of a Lok Sabha...

GS3 (Indian Economy) GS2 (Parliament Government Policies)

What Happened

The Union Cabinet approved amendments to the Insolvency and Bankruptcy Code (IBC), 2016 and the Companies Act, 2013, following recommendations of a Lok Sabha Select Committee.
The IBC (Amendment) Bill was originally introduced in Lok Sabha in August 2025; it was referred to a Select Committee headed by MP Brij Lal Panda, which submitted its report in December 2025.
The Cabinet-approved amendments streamline the CIRP (Corporate Insolvency Resolution Process) admission timeline, introduce a new Creditor-Initiated Insolvency Resolution Process (CIIRP), enable group and cross-border insolvency proceedings, and clarify the priority of government tax claims.
Finance Minister Nirmala Sitharaman had indicated the government planned to introduce the amended IBC legislation during the Budget session of Parliament.
The Companies Act amendments propose to expand CSR (Corporate Social Responsibility) obligations to a broader set of companies, with revised lower financial thresholds for applicability.

Static Topic Bridges

Parliamentary Select Committee — Role in Legislation

A Select Committee of Parliament is formed to examine a specific bill in detail before it is passed. Unlike a Standing Committee (which has jurisdiction over a ministry and scrutinises all its bills), a Select Committee is constituted ad hoc for one bill. The committee holds hearings with experts, ministries, and stakeholders, and submits a report with clause-by-clause recommendations.

Constitutional basis: Article 105 (powers, privileges of Parliament) and the Rules of Procedure of each House; the Houses can refer a bill to a Select Committee or a Joint Parliamentary Committee (JPC) before passage
Select Committee vs Joint Committee: A Select Committee is constituted by one House; a Joint Parliamentary Committee (JPC) has members from both Lok Sabha and Rajya Sabha
Pre-legislative scrutiny: Parliament's rules enable the Presiding Officer or the House to refer bills to parliamentary committees; this strengthens legislative quality
IBC Amendment Bill: Referred to Lok Sabha Select Committee (chaired by Brij Lal Panda) after August 2025 introduction; report submitted December 2025
Procedure after committee report: Cabinet approves amendments incorporating committee suggestions → revised bill introduced → debate and passage

Connection to this news: The Cabinet approval is the executive step following the legislature's pre-scrutiny by the Select Committee — a standard legislative pipeline for complex economic legislation where parliamentary expertise review is built in before final enactment.

Insolvency and Bankruptcy Code — Key Institutions and Their Roles

The IBC ecosystem rests on a set of specifically designed institutions that collaborate to process insolvency cases:

IBBI (Insolvency and Bankruptcy Board of India): Regulates Insolvency Professionals (IPs), Insolvency Professional Entities (IPEs), and Information Utilities (IUs); established under Section 188 of IBC; quasi-judicial and regulatory body
NCLT (National Company Law Tribunal): Adjudicating authority under IBC for corporate entities; established under Companies Act 2013 (Section 408); replaced Company Law Board and Board for Industrial and Financial Reconstruction (BIFR)
NCLAT (National Company Law Appellate Tribunal): Appellate authority; hears appeals from NCLT orders; Section 61 of IBC
DRT (Debt Recovery Tribunal): Adjudicating authority under IBC for individuals and partnership firms; established under RDDBFI Act 1993
Resolution Professional (RP): Runs the CIRP; takes management control from existing promoters; appointed by CoC; regulated by IBBI
Committee of Creditors (CoC): Financial creditors committee that votes on resolution plans; 66% majority for approval; operational creditors have representation but no voting rights

Connection to this news: The amendments (CIIRP, group insolvency, government claim priority) all work through these existing institutions — CIIRP operates outside NCLT initially but feeds back into it; group insolvency provisions enable a common NCLT bench; the government claim priority clarification directly affects CoC decision-making on resolution plans.

Corporate Insolvency Resolution — Empirical Performance and Reform Rationale

The IBC was designed to replace India's pre-2016 insolvency system, which was characterized by decade-long delays and low recovery rates. Since its enactment, IBC has resolved hundreds of large cases but has also revealed structural gaps.

Pre-IBC: BIFR under SICA 1985 averaged 5-7 years for resolution; recovery rate was less than 26 cents on the dollar
Post-IBC (2016-2024): CIRP average resolution time has increased beyond the statutory 330 days in practice due to litigation; IBBI reports average CIRP duration of approximately 600-800 days (including appeals)
Cases admitted vs resolved: Of ~7,000 cases admitted to CIRP cumulatively, approximately 900 have been resolved, ~2,000 ended in liquidation, and the rest are ongoing
Recovery rate improvement: Creditors recover approximately 30-32% of admitted claims under IBC resolutions (vs ~26% pre-IBC) — improvement but still below global benchmarks (US ~80%)
World Bank Ease of Doing Business: India's "Resolving Insolvency" rank improved from 136th (2016) to 52nd (2020) after IBC enactment
Total value resolved through IBC since 2016: Rs 3+ lakh crore of stressed assets

Connection to this news: The amendment package — particularly CIIRP's 150-day out-of-court option and the group insolvency framework — directly targets the average CIRP duration problem and the inability to handle interconnected corporate group failures efficiently.

Key Facts & Data

IBC enacted: 2016; administered by Ministry of Corporate Affairs
IBC Amendment Bill introduced in Lok Sabha: August 2025
Select Committee report submitted: December 2025
CIIRP: 150 days (+ 45 extension); 51% financial creditor consent; debtor-in-possession
CIRP statutory maximum: 330 days; actual average (with litigation): ~600-800 days
IBC cases admitted (cumulative to 2024): ~7,000; resolved: ~900; liquidation: ~2,000
Recovery rate under IBC: ~30-32% of admitted claims
World Bank Resolving Insolvency rank (2020): 52nd (up from 136th in 2016)
Companies Act, 2013: Section 135 — CSR; Section 408 — NCLT constitution
Revised CSR threshold (proposed 2025 amendment): Net profit ≥ Rs 3 crore (down from Rs 5 crore)
NCLT replaced: BIFR (under SICA 1985) and Company Law Board