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Finance Minister Nirmala Sitharaman moves Bill to amend IBC, speed up resolution

March 25, 2026 4 min read Economics Polity & Governance GS3 (Indian Economy Mobilisation of Resources) GS2 (Government Policies)
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What Happened

  • Finance Minister Nirmala Sitharaman introduced the Insolvency and Bankruptcy Code (Amendment) Bill, 2026 in Lok Sabha on March 25, 2026, aiming to speed up bankruptcy resolution in India.
  • The Bill is based on recommendations of a Select Parliamentary Committee chaired by BJP MP Baijayant Panda, which submitted its report in December 2025.
  • A key feature is a Creditor-Initiated Insolvency Resolution Process (CIIRP) — an out-of-court, creditor-led settlement mechanism that requires 55% creditor consent before initiation.
  • The Bill also empowers the Central Government to frame rules for cross-border insolvency and corporate group insolvency, addressing cases involving multinational debtors or interlinked corporate structures.
  • The Union Cabinet cleared the amendments on March 10, 2026 before tabling.

Static Topic Bridges

Insolvency and Bankruptcy Code, 2016 — Origins and Architecture

The Insolvency and Bankruptcy Code (IBC) was enacted on May 28, 2016 to consolidate and amend laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals. Prior to IBC, insolvency proceedings were fragmented across multiple laws — the Companies Act 2013, SICA 1985, SARFAESI Act 2002, and the Recovery of Debts Act 1993 — creating delays and low recovery rates for creditors.

  • The IBC established two adjudicating authorities: the National Company Law Tribunal (NCLT) for companies and LLPs, and the Debt Recovery Tribunal (DRT) for individuals and partnerships.
  • The Insolvency and Bankruptcy Board of India (IBBI) was created as the regulator overseeing insolvency professionals, agencies, and information utilities.
  • The Corporate Insolvency Resolution Process (CIRP) must ideally conclude within 180 days (extendable to 330 days including litigation time).
  • Despite the tight statutory timeline, actual resolution on average takes 380–850 days due to NCLT workload and appeals.
  • As of 2024, IBC has rescued 1,194 companies through resolution plans, with creditors realising ₹3.89 lakh crore, though recovery rate has declined from 43% (2019) to ~32.8%.

Connection to this news: The 2026 amendment addresses IBC's most persistent gap — the mismatch between statutory timelines and actual resolution times — by introducing out-of-court creditor-led processes that bypass the congested tribunal route.

Committee of Creditors (CoC) and Creditor Rights

Under the IBC, when a CIRP is initiated, a Committee of Creditors (CoC) is formed comprising financial creditors who vote on resolution plans. The CoC has significant powers: it can approve or reject resolution plans, extend timelines, and even liquidate a debtor. Decisions require at least 66% voting share approval (reduced from 75% in 2019 amendments).

  • Financial creditors (banks, NBFCs) have voting rights in proportion to their outstanding debt.
  • Operational creditors (suppliers, employees) do not have voting rights in the CoC but must receive a minimum payment under any resolution plan.
  • The resolution professional (RP) manages the company during CIRP but the CoC takes key economic decisions.
  • The 2019 amendment introduced the concept of a "pre-packaged insolvency resolution process" (PIRP) for MSMEs, allowing debtors to approach CoC with a base resolution plan before formal NCLT admission.

Connection to this news: The CIIRP proposed in the 2026 bill expands the creditor-led approach further — enabling out-of-court settlement before NCLT admission, with 55% creditor consent, reducing time and cost compared to formal CIRP proceedings.

Cross-Border Insolvency

Cross-border insolvency refers to insolvency situations where the debtor has assets, liabilities, or creditors in more than one country. India currently lacks a formal cross-border insolvency framework, creating challenges when multinational companies or their subsidiaries enter CIRP. Most advanced economies follow the UNCITRAL Model Law on Cross-Border Insolvency (1997) as the international standard.

  • The UNCITRAL Model Law provides for recognition of foreign insolvency proceedings and cooperation between courts of different countries.
  • Without a domestic framework, Indian courts must rely on ad hoc judicial cooperation when foreign creditors or foreign assets are involved.
  • The Insolvency Law Committee (2018) and the Cross-Border Insolvency Rules/Regulations Committee (2020) had both recommended adopting a modified UNCITRAL Model Law for India.
  • Corporate group insolvency (involving interconnected companies) adds complexity — a subsidiary's insolvency may trigger cascading defaults in the parent or sister companies.

Connection to this news: The 2026 Bill empowers the Central Government to frame rules for cross-border and group insolvency, filling a critical gap that has delayed resolution in several high-profile cases involving Indian companies with international operations.

Key Facts & Data

  • IBC enacted: May 28, 2016 (No. 31 of 2016).
  • CIRP timeline: 180 days statutory (330 days maximum with litigation); actual average: 380–850 days.
  • Creditors realised ₹3.89 lakh crore under IBC; recovery rate ~32.8% (declined from 43% in 2019).
  • 1,194 companies rescued through resolution plans as of 2024.
  • CIIRP requires consent of creditors holding at least 55% of outstanding debt.
  • Select Committee chaired by Baijayant Panda submitted recommendations in December 2025.
  • Bill also addresses stricter timelines, enhanced CoC powers, and group insolvency.
  • NCLT has 16 benches with only 20 bench members — primary bottleneck for resolution delays.