The Lok Sabha passed on Monday a bill to amend the insolvency law to provide for strict timelines, an out-of-court settlement option and enable the framework for cross-border insolvency processes.
The bill replaces the underutilised fast-track process with a new creditor-initiated insolvency framework, featuring out-of-court initiation, debtor-in-possession and creditor-in-control model, where management continues to vest in the existing board of directors or partners with safeguards, and defined timelines.
Stricter timelines will be put in place to ensure the timely resolution of stressed companies, and there will be penalties to deter vexatious and frivolous complaints that delay the process.
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.
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 the current capacity, it could take over a decade to clear the backlog, the agency said.
Among other changes, an application for initiating the insolvency resolution process has to be admitted within 14 days if the default by a company has been established, and appeals related to IBC before the National Company Law Appellate Tribunal (NCLAT) have to be decided upon within three months.
Piloting the bill in the LS, finance and corporate affairs minister Nirmala Sitharaman said that the 12 amendments being made in the IBC would help maximise the value for stakeholders and improve the governing process itself.
Amendments seek to strengthen the existing insolvency framework, as well as address practical challenges, and incorporate evolving global best practices, the minister said.