What Happened
- The Lok Sabha passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, with Finance Minister Nirmala Sitharaman stating the amendments are designed to "maximise value for all stakeholders" — creditors, debtors, employees, and the economy at large.
- The bill was passed after the government accepted all recommendations of the Select Committee of Parliament that had reviewed the earlier draft.
- Key structural changes include introducing the Creditor-Initiated Insolvency Resolution Process (CIIRP), refining pre-packaged insolvency for MSMEs, and mandating the Committee of Creditors (CoC) to record reasons for its decisions.
- Sitharaman cited IBC's track record — banks recovering 52.3% of all bad-loan recoveries through IBC — as evidence of the code's centrality to financial sector health.
- The bill also creates enabling provisions for group insolvency and cross-border insolvency frameworks, which are to be operationalised through IBBI regulations.
- A mandatory 14-day timeline for admitting insolvency applications is introduced to eliminate pre-admission delays that have frustrated creditors.
Static Topic Bridges
Parliament's Role in Insolvency Law — Select Committee Process
Bills that are highly technical or have wide economic impact are often referred to Parliamentary committees for detailed scrutiny before passage. A Select Committee is a joint body of members from one House (unlike a Joint Parliamentary Committee which involves both Houses) constituted to examine a specific bill. The committee calls expert testimony, studies comparative international frameworks, and submits a report with recommendations that the government may accept partially or fully.
- Select Committees are constituted under Rule 96 of Lok Sabha Rules of Procedure.
- The IBC Amendment Bill, 2025 was referred to a Select Committee, whose recommendations were fully incorporated before passage.
- This is in contrast to the original IBC 2016, which was passed after review by a Joint Committee of Parliament.
- The Insolvency Law Committee (ILC), chaired by the Secretary, Ministry of Corporate Affairs, periodically reviews IBC and recommends amendments; its 2019 and 2022 reports have shaped successive amendments.
- Full acceptance of Select Committee recommendations is uncommon and signals strong government consensus on the reform direction.
Connection to this news: The government's acceptance of all Select Committee recommendations indicates that the 2026 amendments have broad Parliamentary legitimacy and are unlikely to face legal challenges on procedural grounds.
IBC's Stakeholder Hierarchy — Waterfall Mechanism
One of the most litigated aspects of IBC is the order of priority in which different stakeholders receive proceeds from resolution or liquidation. This "waterfall" determines who gets paid first and how much. The IBC created a clear waterfall that departed from the traditional creditor-hierarchy under company law, elevating financial creditors above operational creditors and treating workmen's dues separately.
- Under Section 53 (liquidation waterfall): Insolvency resolution process costs and liquidation costs are paid first (super-priority), followed by workmen's dues (24 months), secured creditors, employee wages (12 months), unsecured financial creditors, government dues (24 months), remaining secured creditors (post-security sale shortfall), then unsecured operational creditors, and finally equity shareholders.
- The Supreme Court upheld this hierarchy in Swiss Ribbons Pvt. Ltd. v. Union of India (2019), including the differential treatment of financial and operational creditors.
- The Finance Minister's emphasis on "maximising value for all stakeholders" reflects IBC's underlying philosophy — maximising the going-concern value of distressed assets rather than mere debt recovery.
- In CIRP, the resolution plan must account for the interests of all creditors, operational creditors, employees, and the acquirer.
Connection to this news: The phrase "maximise value for all stakeholders" directly invokes Section 53's waterfall principle and IBC's broader philosophy of preserving enterprise value through resolution rather than liquidation.
Insolvency and Bankruptcy Board of India (IBBI) — Regulatory Role
IBBI is the apex regulatory body established under Section 188 of IBC, 2016 to regulate insolvency professionals, insolvency professional agencies, information utilities, and the overall CIRP/liquidation process. It functions as a quasi-judicial body under the Ministry of Corporate Affairs.
- IBBI has the power to make regulations prescribing the detailed procedures for CIRP, PPIRP, liquidation, and individual insolvency.
- It registers and regulates Insolvency Resolution Professionals (IRPs/RPs) through Insolvency Professional Agencies (IPAs).
- IBBI maintains the public database of insolvency cases, ensuring transparency.
- It can investigate and take disciplinary action against errant IPs and IPAs.
- Group insolvency and cross-border insolvency frameworks introduced by the 2026 amendment will be operationalised through IBBI regulations, making IBBI's regulatory capacity central to the amendments' effectiveness.
Connection to this news: IBBI will be the primary implementation body for the new CIIRP, group insolvency, and cross-border insolvency frameworks, and its regulatory capacity will determine whether the amendments achieve their intended goals.
Key Facts & Data
- Bill passed: Insolvency and Bankruptcy Code (Amendment) Bill, 2025 — passed Lok Sabha on March 30, 2026
- IBC recovery statistic cited by FM: ₹54,528 crore = 52.3% of total bank bad-loan recoveries of ₹1,04,099 crore
- Select Committee recommendations: All accepted by the government before re-tabling the bill
- New timeline: 14-day mandatory admission window after default is established
- CIIRP trigger: Financial creditors holding at least 51% of total financial debt
- CoC vote for resolution plan: 66% of voting shares required
- Liquidation waterfall: Section 53 of IBC, 2016
- IBBI established: Under Section 188 of IBC, 2016; nodal regulator under Ministry of Corporate Affairs
- IBC enacted: May 28, 2016 (received Presidential assent)
- Previous major amendments: IBC Amendment Act 2018, IBC Amendment Act 2019, IBC Amendment Act 2020 (COVID-related threshold), IBC Amendment Act 2021 (PPIRP for MSMEs)