IBC Amendment Bill 2025: Unresolved Challenges and the Road Ahead

“14 Days to Decide: Is India’s Bankruptcy Court on Fast-Forward or Heading for a Crash?

For many years, getting a company bankruptcy case accepted by the court was very slow. On average, it took 434 days, which is more than one year, just for the court to decide whether the case should be accepted or not.

Now, the IBC Amendment Bill, 2025 says that the NCLT must accept or reject a case within only 14 days.

But this raises a serious question. The judges are the same, the courts are already very busy, and there is no big improvement in staff or facilities. So how will they work so fast?

The 14-day limit looks good in the law, but in real life, it may be very hard to follow. It is a very big promise, and also the one most likely to fail in practice.

On 12 August 2025 the Insolvency And Bankruptcy Code (Amendment) Bill, was presented to the Lok Sabha. In which Our Finance Minister, Nirmala Sitharaman, is trying to fix the old bankruptcy law (IBC) because it was moving very slowly and allowing the wrong people to take advantage of the system. This is not a small change. It is a serious effort to correct the biggest problems in India’s corporate bankruptcy process.

The goal is simple: reduce delays, get more value from failing companies, and make India’s rules match global standards.

The original IBC law, made in 2016, was a good first step. But now, it needs improvement so that the process becomes faster, fairer, and actually helps companies survive instead of dragging cases for years.

This new version gives banks and lenders much more power, and that is exactly what the law is meant to do.

Background

The legal setup relies on two main bodies:

• National Company Law Tribunal (NCLT): This specialized court handles all the cases.
• Insolvency and Bankruptcy Board of India (IBBI): This is the regulatory boss. It sets the rules and supervises the professionals (like the Resolution Professionals) who run the processes.

Key Features of the IBC Amendment Bill 2025

The bill introduces several major, practical changes designed to deliver speed, flexibility, and harsh consequences for fraudsters.

1. Faster Case Admission
   • A huge previous issue was the average 434 days it took just for the NCLT to admit a case.
   • 14-Day Deadline: The NCLT has a strict 14-day deadline to admit a case. If they delay, they must provide a reason for the same.
   • Final Proof: Records from banks and financial institutions are now treated as final proof of default, this eliminates the time-wasting arguments.

2. Expanded Asset Pool for Creditors : Now, banks can take money from more than just the company.
   • More Property Included: Banks can go after the owner’s personal property, guarantor companies, and other companies in the same group.
   • Cancel Wrong Deals: If the company sold things cheaply or did fake deals, banks can check such deals made in the last 2 years and cancel them.
   • Guarantors Have No Protection: People who gave a guarantee, Banks can now take action against them immediately.

3. New Options for Rescue and Recovery
   • Out-of-Court Resolution (CIIRP): The new process allows failed companies to resolve their matters outside the court. This reduces pressure on the NCLT and helps them to finish cases within 150 days.
   • Group Insolvency: Companies which belong to the same group can be resolved together. This will avoid confusion and help to recover more value.
   • Flexible Liquidation: If the company is impossible to revive, creditors can sell the assets separately instead of closing everything. Creditors can also have a right to control or change the liquidator to protect their interests.

4. Global Alignment (Cross-Border Insolvency) The introduction of Cross-Border Insolvency rules aligns India with the UNCITRAL Model Law. This framework is meant to:
   • Help Indian creditors recover assets held abroad.
   • Promote cooperation between courts of different countries.
   • Protect the interests of the stakeholders, including the foreign ones.

Key Problems in the Amendment

While the goals are great, there are some serious practical and structural hurdles that may  threaten the Bill’s success.

1. NCLT Is Overloaded and Not Ready

• The NCLT was not built to handle so many bankruptcy cases, and the new law does not plan for more benches or fast courts.
• The courts have too few staff and poor infrastructure.
• The problem is clear: expecting the NCLT to follow very strict timelines while it already has too many pending cases is not realistic.

1. 14-Day Time Limit Is Not Practical

• Deciding a case in just 14 days is very difficult and goes against basic fairness.
• Fair Process Needs Time: The other side must get time to reply, and judges need time to hear both sides properly.
• Because of this hurry, the decision may be unfair and can be challenged in higher courts like the NCLAT or Supreme Court.

In the Surendra Trading Company v. Juggilal Kamlapat Jute Mills (2017) ^[1] case, the Supreme Court said the 14‑day limit for the NCLT to accept or reject a bankruptcy case is just a guideline, not a strict rule. Courts can take more time if needed, for example, to let the other side reply or to make the hearing fair. This shows that deciding a case in just 14 days, as the IBC Amendment Bill 2025 wants, is very hard in reality and could lead to unfair decisions that may be challenged in higher courts.

1. Giving Creditors More Power in Liquidation – A Problem

The main goal of the IBC is to save companies quickly. Closing a company should happen only at the end. Time limits exist so that the company does not lose value.

When insolvency begins, control moves from the owners to a Resolution Professional, who works under the Committee of Creditors (CoC). The CoC tries to save the company by approving a plan. If this does not work, the company goes into liquidation. Earlier, the court appointed the liquidator, which helped keep things fair and neutral.

Under the new Bill, the CoC gets power during liquidation also. Creditors can choose or remove the liquidator and watch over his work. This can create a problem because liquidation should be fair to everyone, not just for the creditors. Giving too much power to the creditors can create a confusion between workers, small creditors, and others.

Some countries have similar rules like UK^{[2] [3]}, Hong Kong^[4], US^[5], Germany^[6] allowed the creditors to supervise liquidation, but they also have better systems and strong checks. Given that Indian courts are already slow, this change might cause more disagreements, unfair sales, and pressure on the person managing the shutdown, possibly making the whole process less fair than intended and going against the balanced idea of the IBC (Insolvency and Bankruptcy Code).

1. Short Withdrawal Time Can Cause Problems

The new Bill lets a company withdraw its insolvency case only in a very short time after the CoC is formed but before resolution plans are invited, and only if 90% of the CoC agrees. This small window may make it harder to settle cases outside court, which can reduce the value for both debtors and creditors.

Earlier, under the IBC and IBBI rules, a case could be withdrawn before the CoC was formed, or after it was formed with 90% approval, giving more flexibility. The Supreme Court’s ruling in the Swiss Ribbons case back in 2019 stated that if the group of lenders (the CoC) has not yet been formed, the court responsible for insolvency (the NCLT) can allow the company to simply withdraw or cancel its bankruptcy case.^[7]

The new Bill reduces this flexibility. Even if 90% of the CoC wants to settle, the law may not allow it. This is unfair because the main aim of insolvency law is to get the best value. If parties can settle outside court, the law should let them.

Limiting withdrawals may increase costs, add pressure on courts, and create more disputes. As of December 2024, over 20,000 cases were pending before the  NCLT^[8]. By June 2025, about 14% of insolvency cases were withdrawn, mostly small cases^[9]. This shows that early settlements are common and helpful, and the Bill may do more harm than good.

1. Cross-Border Rules Are Too Early

• Following global rules is a good idea, but India is not ready yet.
• Fix Our System First: Foreign courts will not trust Indian decisions if our own system is slow and overburdened.
• Unclear Setup: Without strong courts, enough judges, and a fast system, global cooperation will be hard to apply in reality
• The new bill gives the power to the central government to make rules for cross-border insolvency cases but does not explain the procedure to handle the cases. Right now, under Section 234 of the IBC, the government can make agreements with other countries to enforce the law^[10]. No such agreements have been made yet.

The Insolvency Law Committee (2018) said that the current system is slow and uncertain, and it will only create confusion for debtors, creditors, and courts. In many countries they have a separate section in the IBC, based on the UNCITRAL Model Law^[11], in which they clearly explain how to deal with foreign cases, how domestic courts can intervene, and how relief will be provided.

But the new bill only provides the rule-making power to the government, without any clear explanation of how it will proceed. This change only gives the discretionary power to the government to change or adjust parts of the IBC, but with a lack of limits and guidance.

The Supreme Court (1973)^[12] said that lawmakers cannot give away their core law-making powers.

They must:

1. Set clear rules.
2. Give proper guidance.
3. Not be vague, and
4. Keep control over rules made by others.

So, this part of the bill, by giving too much power to the government, just creates confusion and allows the government to use its power beyond the bars.

Final Word:

This Bill is a strong step to make the Indian market safer and better for banks and investors.

But the law will work properly only if the NCLT is strengthened. If courts remain overloaded, the promise of fast decisions will stay on paper and get stuck in delays.

^[1] https://ibbi.gov.in/webadmin/pdf/order/2017/Oct/19th%20Sept%202017%20in%20the%20matter%20of%20Surendra%20Trading%20Company%20Vs.%20Juggilal%20Kamlapat%20Jute%20Mills%20Co.%20Ltd.%20&%20Ors.%20CA%20No.%208400-2017_2017-10-11%2018:24:37.pdf

^[2] Section 101, Chapter IV, Insolvency Act 1986, United Kingdom, https://www.legislation.gov.uk/ukpga/1986/45/contents.

^[3] Chapter 9, The Insolvency (England and Wales) Rules, 2016, United Kingdom,  https://www.legislation.gov.uk/uksi/2016/1024/contents.

^[4] Sections 194, 199(2) and 200, Cap. 32 Companies (Winding Up and Miscellaneous Provisions) Ordinance, Hong Kong, https://www.elegislation.gov.hk/hk/cap32.

^[5] Section 705, 11 U.S. Code Chapter 7 – Liquidation, United States of America, https://www.law.cornell.edu/uscode/text/11/chapter-7/subchapter-I.

^[6] Sections 56a, 67, 69 and 160, Insolvency Code (Insolvenzordnung, InsO), Germany, https://www.gesetze-im-internet.de/englisch_inso/englisch_inso.html.

^[7] Para 52, Writ Petition (Civil) No 99 of 2018, Swiss Ribbons Pvt. Ltd. & Anr. versus Union of India & Ors, Supreme Court of India, January 25, 2019, https://ibbi.gov.in/webadmin/pdf/order/2019/Jan/25th-Jan-2019-in-the-matter-of-Swiss-Ribbons-Pvt.-Ltd.-and-Anr-Writ-Petition-Civil-No.37-99-100-115-459-598-775-822-849-and-1221-2018-In-Special-Leave-Petition-Civil-No.28623-of-2018_2019-01-25-13-58.pdf.

^[8] Starred Question No. 222, Lok Sabha, Answered on March 17, 2025, https://sansad.in/getFile/loksabhaquestions/annex/184/AS222_n4MMkm.pdf?source=pqals.

^[9] Insolvency and Bankruptcy News, April – June 2025, Insolvency and Bankruptcy Board of India, https://ibbi.gov.in/uploads/publication/3694d8874ee2ac5802de48d293ad5802.pdf.

^[10] Report of the Insolvency Law Committee on Cross Border Insolvency, Ministry of Corporate Affairs, October 2018, https://ibbi.gov.in/uploads/resources/Report_on_Cross%20Border_Insolvency.pdf.

^[11] Status: UNCITRAL Model Law on Cross-Border Insolvency (1997), United Nations Commission on Cross-Border Insolvency, as accessed on October 10, 2025, https://uncitral.un.org/en/texts/insolvency/modellaw/cross-border_insolvency/status.

^[12] Para 15, Civil Appeals Nos. 212-215, Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. Asstt. Commissioner of Sales Tax and Others, Supreme Court of India, December 21, 1973.