Syllabus: GS2/ Governance; GS3/ Economy
Context
- The Chairperson of the Select Committee of Lok Sabha presented the Report on the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 to the Lower House.
Recommendations of Select Committee
- The Committee has proposed fixing a three-month time limit for the National Company Law Appellate Tribunal (NCLAT) to decide insolvency appeals.
- The definition of the term ‘service provider’ be suitably modified to include ‘registered valuer’ to the list of entities that are provided under the IBC, and the definition for ‘registered valuer’ be suitably inserted.
- It also suggested that to maintain coherence, appropriate references to ‘registered valuer’ be included where the term service provider is used in the Amendment Bill and at all relevant places where it has a consequential effect.
- On the corporate insolvency resolution process (CIRP), the committee proposed widening the definition of a resolution plan to allow more than one resolution plan for a corporate debtor undergoing CIRP.
Key Provisions of the Bill
- Mandatory Admission of CIRP: The bill mandates that the National Company Law Tribunal (NCLT) must admit an insolvency application within 14 days if the default is proven and the application is complete, removing judicial discretion on this timeline.
- Creditor-Initiated Insolvency Resolution Process (CIIRP): A new, largely out-of-court process for specific financial creditors has been introduced.
- In this process, management remains with the debtor under the oversight of a Resolution Professional (RP), with a goal of completion within 150 days.
- Enhanced Role for Committee of Creditors (CoC) in Liquidation: The CoC is empowered to supervise the liquidation process and appoint or replace the liquidator, shifting control away from a solely NCLT-appointed liquidator.
- Streamlined Withdrawals: Withdrawal of an insolvency application is only permitted after the CoC is formed and before the first invitation for resolution plans, requiring 90% CoC approval to prevent tactical delays.
| Insolvency and Bankruptcy Code (IBC) 2016 – IBC was introduced in 2016 to address rising Non Performing Assets and ineffective debt recovery mechanisms in India. – It aims to overhaul the corporate distress resolution system, replacing debtor-controlled regimes with creditor-in-control mechanisms for time-bound resolutions. – Objectives of the IBC resolution are; a. Business Revival: To save businesses through restructuring, changes in ownership, or mergers, b. Maximization of Asset Value: To preserve and maximize the value of the debtor’s assets, c. Promoting Entrepreneurship and Credit: To encourage entrepreneurship, improve credit availability, and balance the interests of stakeholders, including creditors and debtors. – Currently a maximum 330 days is allowed to find a resolution for a company admitted into the insolvency resolution process. a. Otherwise, the company goes into liquidation. |
Source: AIR
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