The Insolvency And Bankruptcy Code (Amendment) Act, 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (the "AmendmentAct"), represents the most sweeping reform of India's insolvency regime since the enactment of the Insolvency and Bankruptcy Code, 2016 (the "Principal Code"). 

 The amendments aim to strengthen and modernise India's insolvency framework by reducing delays, maximising asset value, and improving governance. Key reforms include the introduction of a creditor-initiated insolvency resolution process ("CIIRP"), a group insolvency framework, and a cross-border insolvency mechanism. These measures collectively seek to align the Principal Code with global best practices, ease judicial burden, and enhance the ease of doing business and access to credit.

This article clearly outlines the key provisions of the Amendment Act, including new institutional mechanisms, changes to core processes, and important clarifications, giving practitioners and stakeholders a simple overview of the updated insolvency framework.

Among the first and most consequential reforms is the amendment to Section 3(31) of the Principal Code, which redefines "security interest." The amendment specifies that a security interest must arise exclusively from an agreement or arrangement between two or more parties, that confers a right, title, interest, or claim over property. Crucially, security interests that arise automatically by operation of law, such as statutory charges created for unpaid taxes, penalties, or other government dues under central or state legislation, will no longer qualify as security interests under the Principal Code. Only consensual security arrangements will be recognised. This directly addresses the uncertainty triggered by the Supreme Court's (“SC”) ruling in “State Tax Officer v. Rainbow Papers Pvt. Ltd” [1] ., where government dues backed by statutory first charges were treated at par with contractual secured debt, thereby elevating statutory authorities to the status of secured creditors and disrupting the waterfall mechanism envisaged under the provisions of Section 53 of the Principal Code.

The Amendment Act also formally introduces a definition of "service provider" under Section 3. This term encompasses insolvency professionals, insolvency professional agencies, information utilities registered with the Insolvency and Bankruptcy Board of India ("IBBI"), and any other persons notified by the Central Government who provide services related to insolvency and bankruptcy processes. The Central Government is empowered to notify additional categories of service providers, and the IBBI is authorised to regulate them. Such providers must register with the IBBI and comply with its regulations, standards, and disciplinary framework, ensuring efficient and proper conduct of insolvency proceedings.

Section 5 of the Principal Code also receives important clarifications. A proviso to Section 5 (11) has been inserted, which provides that when multiple Corporate Insolvency Resolution Process (“CIRP”) applications are pending against the same corporate debtor, and one is admitted, the initiation date shall be the date on which the first application was filed. The definition of "resolution plan" under Section 5(26) is expanded to include the sale of one or more assets of the corporate debtor, enabling resolution plans to be invited for specific assets, particularly in complex multi-asset businesses.

The definition of "voting share" under Section 5(28) is amended to clarify that voting share within the Committee of Creditors ("CoC") will be calculated based only on the financial debt owed to members who are eligible to vote under Section 21. Financial creditors who are related parties of the corporate debtor and, therefore, ineligible to vote will be excluded from this calculation, ensuring fairness and clarity in determining voting strength.

The Amendment Act brings about a decisive shift in the law governing admission of insolvency applications. Amendments to Section 7(5) make admission of a financial creditor's application mandatory once 3 (three) conditions are met: (i) a financial debt in default above the statutory threshold is established; (ii) the application is procedurally complete; and (iii) no disciplinary proceedings are pending against the proposed resolution professional. No other grounds may be used to reject such an application. The amendment expressly overrules the SC’s ruling in “Vidarbha Industries Power Ltd. v. Axis Bank Ltd. ”[2] , which had read discretion into the word "may" in Section 7(5) and allowed extraneous factors such as the debtor's financial health to influence admission.

Amendments to Section 7(5) also provide for more stringent provisions in favour of the creditors. Where a financial institution submits a record of default along with the application, that record alone is sufficient to establish default. The Adjudicating Authority ("AA") is required to decide the application within 14 (fourteen) days, and if this period is exceeded, reasons for the delay must be recorded in writing. Applicants must be given up to 7 (seven) days to rectify defects before any rejection. The proviso to Section 7(4) is omitted to consolidate the 14 (fourteen)-day requirement under Section 7(5) and simplify timelines.

Corresponding amendments to Section 9 empower the IBBI to specify additional information requirements for an application filed by operational creditor through regulations and impose a similar obligation on the AA to record reasons for delay if applications under Section 9 are not decided within 14 (fourteen) days. Amendments to Section 10 broaden the IBBI's powers to specify information to be furnished alongside a corporate debtor's CIRP application. Notably, the right of the corporate debtor to propose an interim resolution professional is also abrogated, eliminating the possibility of bias in interim resolution professional appointments.

3.1 No IU Filing, No Section 9 Application

The Amendment Act amends Section 215(3) to make it compulsory for operational creditors to file their financial information with an Information Utility (“IU”) before initiating proceedings under Section 9.

Currently, this filing is optional, which often leads to delays and disputes at the admission stage over the authenticity of claims. By making IU filing mandatory, the amendment ensures that claims are supported by verified records from the outset.

In practical terms, this change is expected to bring greater transparency and certainty to the process, while also speeding up admission by reducing avoidable disputes.

Section 12A has been revised to introduce clearer and stricter timelines for withdrawing an admitted CIRP application. Under the amended provision, the Adjudicating Authority may permit withdrawal only when the resolution professional files an application with the approval of at least 90% (ninety per cent) of the CoC’s voting share. Thus, the amendment leaves no room for settlement with  the ex-management/ promoters.

Importantly, the amendment limits the withdrawal window to the period after the CoC has been constituted but before the first invitation for Expression of Interest (“EOI”) is issued. This ensures that withdrawals do not occur at a later stage, thereby protecting the time, effort, and interests of genuine resolution applicants and preserving the integrity of the insolvency process.

The AA is required to determine withdrawal applications within 30  (thirty) days, with reasons recorded for any delay. This ensures that the business of the Corporate Debtor is not affected due to the delay in the determination of withdrawal applications.

The most transformative innovation in the Amendment Act is the insertion of Chapter IV-A into Part II of the Principal Code, introducing the CIIRP under new Sections 58A to 58K. This mechanism is designed to provide a faster, creditor-driven resolution pathway for specified categories of corporate debtors while preserving regulatory oversight and debtor protections.

5.1 Eligible Debtors and Scope (Section 58A): 

Section 58A defines the categories of corporate debtors against whom CIIRP may be initiated, empowering the Central Government to notify eligibility criteria, including debtors below prescribed asset or income thresholds, those with specific classes or amounts of debt, or any other notified category. CIIRP cannot be initiated where insolvency resolution or liquidation proceedings under Part II of the Principal Code are already ongoing, or where the corporate debtor has undergone CIIRP, a pre-packaged insolvency process, or a CIRP within the preceding 3 (three) years.

5.2 Initiation Procedure (Section 58B): 

Only financial creditors belonging to classes of financial institutions notified by the Central Government may initiate CIIRP. The initiating creditor must obtain prior approval of at least 51% (fifty-one per cent) in value of the debt due to similarly notified financial creditors of the corporate debtor. The creditor is further required to inform the corporate debtor of its intention and provide a minimum period of 30 (thirty) days to make representations. After considering any representation, the creditor must again obtain the requisite 51% (fifty-one per cent) approval within 30 (thirty) days; failing which, fresh approval must be obtained. Upon completion of these procedural steps, the financial creditor may appoint a resolution professional with no pending disciplinary proceedings. The resolution professional is then required to make a public announcement, communicate compliance to the AA and the IBBI, and CIIRP is deemed to commence from the date of such public announcement. During the CIIRP period, no application for initiation of CIRP or PIRP shall be filed or admitted in respect of the same corporate debtor.

5.3 Debtor's Remedy (Section 58C): 

Section 58C provides a statutory remedy to the corporate debtor, enabling it to file objections to the commencement of CIIRP within thirty days from the creditor-initiated insolvency commencement date. Where the AA finds that no default has occurred, or that initiation was contrary to Sections 58A or 58B, it may declare the commencement void ab initio. Where a default has occurred, but the process has been initiated in contravention of prescribed provisions, the AA is required to convert the CIIRP into a CIRP and pass consequential orders. The AA must dispose of such objections within 30 (thirty) days.

5.4 Timeline and Extension (Section 58D): 

CIIRP must be completed within 150 (one hundred and fifty) days from the commencement date. A one-time extension of up to 45 (forty-five) days may be granted by the AA upon application by the resolution professional and approval of the CoC by a 66% (sixty-six per cent) voting share. Where no resolution plan is approved within the prescribed or extended period, the AA must pass an order converting the CIIRP into a CIRP.

5.5 Debtor-in-Possession with Creditor Oversight (Section 58F): 

Unlike a standard CIRP, the management of the corporate debtor under CIIRP continues to vest in its board of directors or partners. However, the resolution professional is granted oversight powers, including the right to attend meetings of members, directors, or partners and to reject resolutions passed in such meetings in the prescribed manner. Promoters and personnel are obligated to provide complete and accurate information for the preparation of the information memorandum, and liability is imposed for loss or damage arising from omissions or misrepresentations.

5.6 Optional Moratorium (Section 58G): 

Moratorium during CIIRP is not automatic. The resolution professional may apply for a moratorium with the approval of the CoC or, prior to its constitution, with the approval of financial creditors holding at least 51% (fifty-one per cent) in value. The moratorium takes effect from the date of application and continues for the CIIRP period, subject to confirmation by the AA. Mandatory public announcements are required regarding the filing and outcome of moratorium applications.

5.7 Conversion to CIRP (Section 58H): 

Conversion of CIIRP into CIRP is mandatory if  no resolution plan is received within the stipulated period, is  there is a lack of cooperation by the corporate debtor or its personnel, or if the resolution plan is rejected by the AA. Conversion may also occur voluntarily upon a resolution of the CoC passed by a 66% (sixty-six per cent) voting share. Upon conversion, the CIIRP is deemed to have been admitted as an application under Section 7, avoidance proceedings already initiated continue, and CIIRP costs are treated as insolvency resolution process costs under CIRP.

5.8 Withdrawal and Plan Approval (Sections 58I and 58J): 

Section 58I permits withdrawal of the CIIRP by allowing the withdrawal of the public announcement made under Section 58B, subject to the approval of 99% (ninety per cent) of the CoC and an application by the resolution professional. Withdrawal is prohibited before the constitution of the CoC and after the issuance of the first invitation for resolution plans. Approval of resolution plans under CIIRP under Section 58J requires approval by the CoC with a 66% (sixty-six per cent) voting share, followed by submission to the AA, which applies Section 31 of the Principal Code mutatis mutandis.

Overall, Chapter IV-A represents a decisive shift towards a creditor-driven, time-bound insolvency framework. By preserving debtor-in-possession management while strengthening creditor oversight and creating seamless pathways for conversion to CIRP where necessary, it balances speed with safeguards.

Amendments to Section 30(2) introduce an important recalibration of the entitlements of the dissenting financial creditors'. Under the new clause (ba), dissenting financial creditors must receive at least the lower of: (i) the amount payable in liquidation under Section 53, or (ii) the amount they would receive if the resolution plan's distributable amount were applied according to the Section 53 priority order. Read together with the amended Section 53 (discussed below), this ensures that dissenting financial creditors cannot leverage the full face value of their debt or security as a minimum guarantee, providing greater certainty in plan approvals.

The substituted Section 30(2)(d) now requires every resolution plan to provide for the constitution of a committee to oversee the implementation and supervision of the resolution plan once the same is approved by the AA. 

Amendments to Section 31 introduce several procedural streamlining measures. A new proviso to sub-section (1) allows the AA to first approve the implementation of a resolution plan and, by a separate order, approve the manner of distribution within 30 (thirty) days, bifurcating approval to prevent distribution disputes from stalling business continuity. This power shall  be exercised only by the AA on an application made by the resolution professional with the approval of the CoC.  Before approving the implementation of the resolution plan, the AA shall confirm that the resolution plan meets the mandatory requirements under section 30, except for the requirement concerning the manner of distribution, such as the minimum distribution-related requirement for certain creditors. During the interim period, the moratorium under Section 14 continues to apply, and upon subsequent approval of  the manner of distribution , the process shall stand completed. 

A proviso to sub-section (2) empowers the AA to provide the CoC an opportunity to rectify any defects in the resolution plan before rejection, thereby minimising multiplicity of proceedings. A new sub-section (2A) mandates that the AA must pass an order approving or rejecting the resolution plan within 30 (thirty) days.

The proviso to sub-section (4) is also amended to require that where a resolution plan involves a combination requiring Competition Commission of India (“CCI”) approval, such approval must be obtained by the resolution applicant before the resolution plan is submitted to the AA for approval. This relaxes the mandatory requirement for obtaining the approval of CCI before the resolution plan is approved by the CoC, thereby addressing operational delays and aligning the CIRP timelines which were earlier disrupted with the passage of the judgment by the SC in “Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors.” [3] 

Sub-sections (5) and (6), newly inserted into Section 31, codify the "clean slate" principle authoritatively established by the SC in “Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd” [4].  The principle operates as a foundational guarantee of the insolvency resolution framework: once a resolution plan receives approval from the AA, all claims against the corporate debtor that are not provided for under the resolution plan stand irrevocably extinguished. No proceedings in respect of such claims may thereafter be continued before any forum, nor may fresh proceedings be instituted.

The rationale underlying this principle is the imperative of commercial certainty. A resolution applicant committing capital to revive a distressed enterprise must do so with full knowledge of the liabilities it assumes. Permitting undisclosed or unaddressed claims to survive the approval of a resolution plan would fundamentally undermine the viability of the plan and deter prospective resolution applicants. The SC in Ghanashyam Mishra unequivocally held that the approved resolution plan binds all stakeholders, including creditors who did not participate in the Committee of Creditors proceedings or who voted against the plan and that claims not incorporated in the plan are extinguished by operation of law upon approval.

It must, however, be noted that the extinguishment operates strictly against the corporate debtor as a going concern under new management. It does not immunise former promoters, erstwhile management, or personal guarantors from liability. Claims and proceedings against such persons remain unaffected and may be continued or initiated independently. Similarly, where a person bearing joint or joint-and-several liability with the corporate debtor has settled a debt that arose prior to the approval of the resolution plan, any consequential right of indemnification that such person may have held against the corporate debtor shall also stand extinguished. The corporate debtor's fresh start cannot be encumbered by indemnity claims flowing from pre-resolution obligations.

6.1 Continuation of Licences, Permits, and Concessions

Complementing the clean slate principle, the newly inserted provisions also address a practical impediment that has historically frustrated the implementation of resolution plans, the suspension or termination of licences, permits, concessions, or analogous statutory or contractual grants on account of defaults committed by the corporate debtor prior to the commencement of the insolvency resolution process. Such grants are frequently essential to the continued operation of the corporate debtor's business, and their revocation upon the mere existence of a prior default would render the resolution plan commercially futile even before it could be implemented.

The provision therefore stipulates that no licence, permit, concession, or similar grant shall be suspended or terminated solely on the ground of a default that occurred before the approval of the resolution plan, provided the resolution applicant complies with the ongoing obligations under such grant going forward. The protection is conditional and prospective in nature: it does not excuse the resolution applicant from future compliance, nor does it prevent the concerned authority from acting against fresh defaults arising after the plan's approval. What it prohibits is the use of pre-resolution defaults as grounds to deny incoming management the benefit of authorisations that are critical to the enterprise's revival. This provision thus reinforces the overarching objective of the Principal Code , which is the maximisation of value and the preservation of the corporate debtor as a going concern.

7.1 Moratorium Extended to Liquidation (Section 33): 

Section 33 is amended to extend moratorium protection into the liquidation process, prohibiting institution of suits or proceedings against the corporate debtor once a liquidation order is passed, subject to the rights of secured creditors under Section 52. Only the liquidator, with prior approval of the AA, may initiate proceedings on behalf of the debtor. New sub-sections 1(A) and 1(B) also allow the AA, on application by the CoC, to restore the CIRP in exceptional cases where there is potential to salvage the corporate debtor.

7.2 Second Chance for Resolution Before Liquidation

The Amendment Act introduces a new Section 33(1A), that creates  a limited “second chance” mechanism. Even where a resolution plan has failed or CIRP timelines have expired—situations that would normally lead to liquidation - financial creditors holding at least 66% (sixty-six per cent) voting share can choose to revive the CIRP. This revival is strictly time-bound, allowing fresh resolution efforts for a maximum of 120 (one hundred and twenty) days.

The provision gives creditors one final opportunity to avoid liquidation and preserve value, while ensuring that the process remains controlled and does not lead to further delays

7.3 Overhaul of Liquidator Appointment (Section 34 and New Section 34A): 

Section 34 is substantially amended to change the process for appointing liquidators. The liquidator will be appointed in accordance with the CoC's proposal, and the resolution professional will no longer be automatically appointed as liquidator. The CoC may propose either the existing resolution professional or another insolvency professional as liquidator, provided the insolvency professional's consents in writing. Where the CoC does not forward a name, or where the IBBI  does not confirm the proposed name, the AA shall appoint a liquidator on a reference from the Board. A new Section 34A is inserted to allow the CoC to replace the liquidator during the liquidation process by a 66% (sixty-six per cent) vote.

 7.4 Eliminating Duplication in Claims Verification During Liquidation

The Amendment Act simplifies the liquidation process by removing the requirement for the liquidator to re-examine and decide claims after appointment. Currently, Sections 38 to 42 require the liquidator to invite, verify, and admit or reject claims again, effectively giving the liquidator a quasi-adjudicatory role, as recognised in Concept Management Consulting Ltd. v. Anand Chandra Swain & Anr [5].

The Amendment Act deletes these provisions and instead provides that the liquidator will rely on the claims already collated and updated during the CIRP, in line with IBBI regulations. The liquidator’s role is now limited to updating the record of claims, rather than adjudicating them afresh.

This change removes duplication, reduces delays, and clarifies that the liquidator’s role is administrative, not adjudicatory.

7.5 Coordinated Enforcement of Common Security (Section 52): 

Section 52(2) is amended to introduce a strict 14 (fourteen)-day timeline for secured creditors to inform the liquidator whether they intend to realise their security interest outside the liquidation process. Failure to communicate within this period results in the security interest being deemed relinquished to the liquidation estate. Where multiple secured creditors hold security over the same asset, no individual creditor can unilaterally proceed to realise its security interest outside liquidation, such realisation requires the approval of secured creditors representing at least 66% (sixty-six per cent) of the total value of secured claims on that asset. Amendments to Section 52(8) further clarify that when a secured creditor realises its security interest outside liquidation, it must contribute a portion of the proceeds towards insolvency resolution process costs, liquidation costs, and worker's dues.

7.6 Clarifying the Liquidation Waterfall (Section 53): 

Section 53 receives critical amendments to resolve longstanding jurisprudential disputes. A new Explanation in clause (b)(ii) of Section 53(1) clarifies that a secured creditor who relinquishes its security to the liquidation estate is treated as secured only to the extent of the value of the security interest relinquished; the balance of the claim ranks as unsecured. The IBBI will determine the value of the security interest.

A further Explanation in clause (e)(i) of Section 53(1) clarifies that government dues shall not receive a higher priority merely because a security interest was created to secure them. Government dues for the 2 (two) years preceding the liquidation commencement date are to be distributed under clause (e) at fifth priority; any older dues are relegated to clause (f) at sixth priority. Illustrations are inserted in sub-section (2) emphasising that private contractual arrangements seeking to subordinate worker’s  dues to secured creditors will be disregarded, while inter se subordination agreements among secured creditors themselves will be respected.

7.7 Streamlined Liquidation Process (Section 54): 

Sub-section (1) of Section 54 is substituted to prescribe a mandatory timeline of 180 (one hundred and eighty) days from the liquidation commencement date for completion of the liquidation process, extendable by 90 (ninety) days on application. New sub-sections (1A) and (1B) empower the CoC to decide how proceedings relating to avoidance transactions, fraudulent or wrongful trading, claims under Section 47, and other suits connected to Section 53 distributions are to be pursued even after dissolution of the corporate debtor. New sub-section (2A) allows the AA, on the CoC's decision under Section 33(2), to order the direct dissolution of the corporate debtor without completing the full liquidation process, a welcome measure for assetless debtors. Sub-section (2B) clarifies that a dissolution order will not affect continuation of avoidance or related proceedings, and sub-section (4) prescribes a mandatory 30( thirty)-day timeframe for the AA to pass a dissolution order.

Section 54A(2)(e) and Section 54A (3) are amended to reduce the financial creditor approval threshold for initiating a pre-packaged insolvency resolution process from 66% (sixty-six per cent) to 51% (fifty-one per cent) of voting shares. This reduction significantly lowers the consensus barrier, making the pre-packaged route more accessible in cases where a slim majority of creditors believes early resolution through the debtor-in-possession model is appropriate.

7.8 Transfer of Guarantor Assets

A new Section 28A is inserted into the Principal Code to allow transfer of a guarantor's asset into the CIRP of the corporate debtor. Such transfer is permitted only where: (i) the creditor holds a security interest over the guarantor's asset; (ii) the creditor has taken possession of that asset by enforcing its security interest under applicable law; and (iii) the creditor and the CoC of the corporate debtor agree to the transfer. Where the guarantor is itself undergoing insolvency resolution, liquidation, or bankruptcy under the Principal Code, additional approval of the guarantor's CoC or creditors is required. After transfer, proceeds will be adjusted against the guarantor's debt, after deducting costs, charges, and expenses; any surplus will be paid to the guarantor or, if the guarantor is under insolvency or bankruptcy proceedings, will form part of that process. This introduction enables a larger asset pool of the Corporate Debtor, resulting in maximisation of its assets and may aid the financial creditors in fetching a better resolution plan. 

7.9 Strengthening the Avoidance Transactions Regime.

The Amendment Act changes how far back authorities can look when examining suspicious transactions. Instead of counting from the insolvency commencement date, the look-back period will now start from the date the CIRP application was filed. This means more transactions can be reviewed and potentially reversed. It also expands the scope of Section 49. Earlier, it mainly applied to the Corporate Debtor’s assets, but now it will also cover transactions involving related parties.

In simple terms, this strengthens the hands of lenders and resolution professionals. They will have better tools to investigate questionable dealings, even at an earlier stage, and recover more value for creditors. At the same time, it sends a clear message to promoters and related parties that any attempt to move assets unfairly will be more closely scrutinised and can be undone.

Section 26 is also clarified to confirm that proceedings relating to avoidance transactions or fraudulent or wrongful trading will continue independently and will not be affected by the completion or liquidation of the CIRP. 

A new Chapter V-A titled "Group Insolvency" is inserted in Part II of the Principal Code, addressing one of the most pressing gaps in the existing insolvency framework. The chapter empowers the Central Government to frame rules governing the manner and conditions for conducting insolvency resolution and liquidation proceedings when such proceedings are initiated against two or more corporate debtors forming part of the same group. The objective is to improve coordination among group-level insolvency processes to maximise value and prevent fragmentation.

The framework is designed as a voluntary procedural coordination mechanism. It includes provisions for appointing a group coordinator to facilitate communication, information sharing, and alignment among the proceedings of group entities. Coordination will be based on an agreement between the participating corporate debtors and their respective CoCs. Rules will address the appointment of a common resolution professional, consolidation of claims, and formulation of group resolution plans, with group companies identified based on control, ownership, or economic interlinkages.

In a significant safeguard for democratic legislative oversight, the chapter mandates that a draft of every rule proposed under it must be laid before each House of Parliament before issuance.

Section 240B empowers the Central Government, by notification, to establish an electronic portal and prescribe procedures for carrying out insolvency and bankruptcy processes under the Principal Code through such portal. This provision modernises the insolvency ecosystem by enabling digital-first administration of proceedings.

Section 240C empowers the Central Government to frame rules on cross-border insolvency, applicable to specified classes of debtors and corporate debtors. Rules under Section 240C may modify or adapt provisions of the Principal Code or the “Companies Act, 2013 ”[6],  including the designation of one or more Benches of the AA to handle cross-border proceedings. The provision further mandates that draft rules under Section 240C must be laid before both Houses of Parliament before issuance, ensuring parliamentary oversight over these consequential rules. Together, Sections 240B and 240C align India's insolvency regime with international best practices, enabling effective recovery of overseas assets and global integration.

The Amendment Act introduces important changes to the personal insolvency framework. A new sub-section (1A) in Section 106 requires the resolution professional to report to the AA if no repayment plan is submitted within 21 (twenty-one) days from the last claim submission date under Section 105. If the AA is satisfied that the debtor failed to prepare the repayment plan within the stipulated time, it must terminate the insolvency resolution process without extension ; thereafter, either the debtor or the creditor may apply for bankruptcy. A new sub-section (3A) in Section 106 makes it mandatory for the resolution professional to summon a meeting of creditors by notice when a repayment plan is submitted during the insolvency resolution process of a personal guarantor to a corporate debtor, for consideration of the repayment plan.

A new Section 164A empowers the AA to set aside undervalued transactions deliberately entered by a debtor to keep assets beyond the reach of creditors or to adversely affect their interests. A new Section 183A introduces penalties for frivolous or vexatious proceedings. Section 178 is amended to clarify that government dues arising in the 2 (two) years preceding the bankruptcy commencement date will rank fourth in priority under the residual category, reducing uncertainty over the treatment of such claims.

Section 64A is inserted to penalise frivolous or vexatious proceedings before the AA in CIRP and liquidation, deterring persons from initiating such proceedings to delay the insolvency process. Similarly, Section 183A introduces corresponding penalties in the personal insolvency context.

Section 224 is amended to provide for the formation of the Insolvency and Bankruptcy Fund to support insolvency, resolution, liquidation, and bankruptcy processes under the Principal Code, placing the financial underpinning of the regime on a more robust statutory footing.

Sections 19 and 34(3) are amended to extend the duty to cooperate with the insolvency professional previously limited to directors, promoters, and management to also cover service providers of the corporate debtor, including auditors, accountants, and legal advisors. Non-compliance attracts liability under Section 70, making cooperation by third-party service providers a comprehensive and enforceable obligation.

A new sub-section (1A) in Section 242 empowers the Central Government to remove difficulties in implementing the Act by issuing orders in the Official Gazette within 5 (five) years of commencement; every such order must be laid before each House of Parliament.

11.1 Decriminalisation of Moratorium and Resolution Plan Breaches

The Amendment Act marks a significant policy shift by removing criminal liability for violations of the moratorium (Section 14) and resolution plans (Section 31). Earlier, Sections 74 and 76 imposed strict criminal penalties, including imprisonment of up to 5 (five) years. These provisions have now been omitted.

In their place, the Amendment Act introduces civil penalties through 2 (two) new provisions:

• Section 67B imposes monetary penalties on officers of the corporate debtor and creditors for breaching the moratorium or the terms of an approved resolution plan. 
• Section 67C targets operational creditors who file applications without disclosing existing disputes or full repayment of debt. 

The penalties are substantial, ranging from ₹1 lakh (one lakh Indian rupees)  up to ₹2 crore (two crore Indian rupees), and in the case of resolution plan breaches, may go up to 20% (twenty per cent) of the amount payable under the plan. Importantly, ongoing cases under the earlier criminal provisions will continue, as they are protected by a saving clause.

Overall, this move shifts the regime from criminal enforcement to a civil penalty framework. It is likely to make enforcement more practical and efficient, while still ensuring strong deterrence through significant financial penalties.

11.2 Time-Bound Disposal of Appeals by National Company Law Appellate Tribunal

The Amendment Act introduces a new sub-section (6) in Section 61, mandating the National Company Law Appellate Tribunal to dispose of appeals within three months from the date of receipt.

The Amendment Act seeks to address a major delay point in the insolvency process, prolonged appellate proceedings. Such delays have often held up the implementation of resolution plans and liquidation orders.

By setting a clear timeline for appeal disposal, the change strengthens the overall time-bound nature of the insolvency framework and ensures that appellate proceedings do not slow down the resolution process.

The Amendment Act brings several important changes that together reshape how insolvency works in India. 

• The CIIRP under Chapter IV-A creates a quicker, out-of-court route for creditors to initiate insolvency proceedings, while allowing the debtor's management to continue running the business during the process. 
• The group insolvency framework under Chapter V-A addresses a long-standing practical problem when companies in the same group collapse together; their insolvency proceedings can now be coordinated rather than run separately, saving time and preserving value. 
• The cross-border insolvency provisions under Section 240C allow Indian creditors to more effectively pursue assets held overseas, bringing India in line with global standards.
• The codification of the clean slate principle and the protection of licences after resolution plan approval give incoming investors the certainty they need to commit to reviving a distressed business. 
• The shift from criminal penalties to the levy of fines for breaches of the moratorium and resolution plans makes enforcement more practical and less adversarial.
• The amendment streamlines the CIRP process by allowing CCI approval to be obtained after CoC approval but before filing the resolution plan with the AA, thereby reducing procedural delays and improving the timeline.