Clipped from: https://www.thehindubusinessline.com/opinion/editorial/reforming-insolvency/article70037811.ece
IBC (Amendment) Bill addresses pain points
IBC: A work in progress | Photo Credit: Akhilesh
The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, introduced in the recent monsoon session and now before a select committee, has several features aimed at curbing delays and dubious practices. It follows six earlier amendments to the Code since its inception in 2016. What we can expect now is a more streamlined admission process, perhaps less wiggle room for the corporate debtor to manipulate the proceedings, quicker and better managed liquidation, specialised benches at the National Company Law Tribunal to deal with IBC cases and better access to information through related parties who could earlier not be called into account.
The proposed changes can potentially reduce time and confusion in deciding cases. IBC, which marks a departure from other debt resolution systems by being based on a creditor-in-control model as opposed to a debtor-in-possession one, has been put to the test by promoters who want to wrest back their concern at a discount — with creditors and resolution professionals sometimes playing along. Such dilatory tactics can begin right at the admission stage. The proposed law seeks to make conditions for both admission and the withdrawal of cases watertight and time-bound. In another move, the ‘look back period’ into a debtor’s corporate conduct has been stretched. The Bill also clarifies on the ‘waterfall mechanism’, overturning a legal precedent where government dues were treated on a par with secured creditors. Now, contractual obligations shall prevail, while workmen will receive precedence along with secured creditors. In another big step to expedite the liquidation process, the committee of creditors will remain in charge as opposed to a stakeholders’ panel. An entity slated for liquidation can now be given another chance at revival, which is a positive move — as preservation of productive assets should be given every chance.
The IBC has rightly been looking at various models to expedite resolution, exploring alternatives at the margin to the creditor-in-control norm, such as the pre-pack resolution for MSMEs. The new Bill has mooted a ‘Creditor Initiated Insolvency Resolution Process’, where the debtor shall remain in control, but is expected to contend with an empowered resolution professional. Indeed, IBC reform should be aimed at speedy and fair resolution and liquidation, with the share of the former rising over time; the ratio has risen from 0.2 in FY18 to 0.91 in FY25. The time taken for closure of a case can range between 500-700 days instead of the mandated 330 days. Although IBC remains the preferred mode of debt resolution, creditors realise just 33 per cent of their claims.
The select committee should look at whether violations of Section 29A which debars existing promoters from bidding for a company, have been plugged. These deviations arguably came to light in the Bhushan Steel Case. The conduct of RPs leaves much to be desired. IBC has been a landmark reform move, but it remains a work in progress.
Published on September 11, 2025
aniltikotekar4sme.com 