The Insolvency and Bankruptcy Code (IBC) has undergone another significant legislative overhaul with the enactment of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Amendment Act). The Amendment Act received Presidential assent on April 6, 2026, and has been published in the Official Gazette of India.
Since its introduction in 2016, the IBC has fundamentally altered the insolvency and restructuring framework in India by shifting focus from debtor control to creditor-driven resolution. Over the years, however, practical challenges relating to delays, litigation, value erosion, liquidation inefficiencies, treatment of claims, conduct of insolvency professionals, and procedural bottlenecks have increasingly become areas of concern.
The 2026 amendments aim to address several of these concerns through procedural streamlining, stronger creditor oversight, enhanced accountability mechanisms, and a renewed emphasis on time-bound insolvency resolution. The amendments introduce substantial changes across the corporate insolvency resolution process (CIRP), liquidation proceedings, avoidance transaction mechanisms and resolution plan implementation. Additionally, the Amendment Act also introduces a new framework for creditor-initiated insolvency resolution proceedings, signalling a major policy shift in the insolvency framework in India.
Clarification of Key Definitions and Expansion of the Regulatory Framework
The Amendment Act introduces several definitional clarifications to reduce interpretational disputes. One of the notable insertions is the definition of “registered valuer”, aligned with the Companies Act, 2013. The definition of “service provider” has also been expanded to include insolvency professionals, insolvency professional agencies, information utilities, registered valuers, and any other notified persons who render services in relation to insolvency and bankruptcy processes.
Another significant clarification has been introduced regarding “security interest”. The amendment expressly clarifies that a security interest exists only where it creates a right, title or interest over property pursuant to an agreement or arrangement between parties, and does not include security interests arising merely by operation of law. This clarification will have considerable consequences in disputes involving statutory dues, government claims and competing creditor rights during insolvency and liquidation proceedings.
The Amendment Act also expands the scope of “resolution plan” by recognising the sale of one or more assets of the corporate debtor through one or more plans proposed by different resolution applicants. This marks a commercially important development as it enables more flexible and modular resolution structures instead of restricting resolution to a single comprehensive plan.
Strengthening Time-Bound Adjudication and Admission
One of the recurring criticisms against the IBC framework has been delays before the Adjudicating Authority despite the Code’s emphasis on strict timelines. The Amendment Act attempts to address this concern by introducing mandatory recording of reasons where prescribed timelines are not adhered to. The amendments to Sections 7, 9 and 10 now require the Adjudicating Authority to record reasons in writing where orders admitting or rejecting CIRP applications are not passed within 14 days. Similar timeline-based obligations have also been inserted regarding the approval of withdrawal applications, the approval or rejection of resolution plans, liquidation orders, and dissolution orders.
The amendments to Section 7 further clarify that where statutory requirements for admission are satisfied, no other grounds shall ordinarily be considered for rejection of an application filed by a financial creditor. Additionally, a record of default maintained by a financial institution with an information utility has been recognised as sufficient evidence to establish default.
Revised Framework for Withdrawal of CIRP Applications
The Amendment Act substitutes Section 12A and significantly restructures the framework governing withdrawal of CIRP applications. Under the amended provision, withdrawal of applications admitted under Sections 7, 9 or 10 may be permitted only after approval by 90% of the voting shares of the Committee of Creditors (CoC). Further, the amendment now expressly prohibits withdrawal before constitution of the CoC and after issuance of the first invitation for submission of resolution plans. This change aims at preventing strategic or disruptive withdrawals at advanced stages of the insolvency process after substantial time and resources have already been invested by stakeholders.
Role and Accountability of Insolvency Professionals
The amendments substantially expand accountability expectations from insolvency professionals. The interim resolution professional is now expressly required to verify and, where necessary, determine the value of claims while collating them. Section 19 has also been widened by replacing the reference to “personnel” with “persons”. The obligation to cooperate with the interim resolution professional and resolution professional now extends not only to existing personnel, but also former personnel, promoters, persons associated with management and persons engaged under service contracts with the corporate debtor.
The amendments also streamline appointment procedures under Section 22, where the CoC resolves to appoint the interim resolution professional as the resolution professional. Such an appointment is deemed effective from the date of the CoC resolution itself, thereby reducing procedural delay.
Under the substituted Section 47, creditors, members or partners of the corporate debtor may now independently approach the Adjudicating Authority where the resolution professional or liquidator fails to report preferential, undervalued, extortionate or fraudulent transactions. Further, the Adjudicating Authority may direct disciplinary proceedings against insolvency professionals where sufficient information existed, but such transactions were not appropriately reported.
Avoidance Transaction Framework
The Amendment Act substantially strengthens the framework relating to avoidance transactions, undervalued transactions, extortionate credit transactions and fraudulent or wrongful trading. The amended Section 26 clarifies that proceedings relating to avoidance transactions, fraudulent trading or wrongful trading shall continue independently and shall not be affected by completion of CIRP or liquidation proceedings. The amendments also modify look-back periods under Sections 43, 46 and 50 by clarifying that the relevant periods begin from the initiation date and end on the insolvency commencement date.
Moratorium and Guarantor-Related Changes
The amendments introduce important clarifications regarding moratorium protections and guarantor assets. Section 14 now clarifies that moratorium protection also applies where a surety seeks to initiate or continue proceedings against the corporate debtor pursuant to a contract of guarantee. The newly inserted Section 28A introduces a significant framework permitting the transfer of assets of personal guarantors and corporate guarantors during CIRP, where creditors have enforced security interests over such assets. Subject to prescribed approvals, such assets may form part of the insolvency resolution process.
Resolution Plan Reforms and “Clean Slate” Principle
Section 30 now expressly addresses treatment of dissenting financial creditors by prescribing minimum payment protections linked to liquidation value and waterfall principles. The CoC is also required to record reasons while approving a resolution plan. The amendment additionally requires the constitution of a supervision committee for the implementation and monitoring of the resolution plan, consisting of an insolvency professional, representatives of creditors and the resolution applicant.
Section 31 introduces another major reform by allowing two-stage approval of resolution plans. The Adjudicating Authority may first approve implementation of the plan and subsequently approve the manner of distribution. This appears intended to prevent delays in implementation caused by disputes over distribution mechanics. Section 31 now statutorily reinforces the “clean slate” principle. Upon approval of the resolution plan, claims against the corporate debtor arising prior to approval stand extinguished unless otherwise provided under the plan, and proceedings relating to such claims cannot continue thereafter. Licences, permits, quotas, concessions and regulatory approvals associated with the corporate debtor are also protected from suspension or termination, subject to compliance with continuing obligations.
Role of the Committee of Creditors During Liquidation
Under the newly inserted Section 21(11), the CoC constituted during CIRP shall also supervise the conduct of the liquidation process. The Board may additionally specify classes of creditors entitled to attend CoC meetings during liquidation, though without voting rights. Further, the newly inserted Section 34A empowers the CoC to replace the liquidator during liquidation proceedings through a 66% voting threshold. This marks a notable move towards continued creditor oversight even after the transition from resolution to liquidation. The liquidator is also now required to maintain updated creditor claim lists and continue or institute proceedings relating to avoidance transactions and fraudulent trading.
Restoration of CIRP Before Liquidation
The Amendment Act introduces a new mechanism that permits the restoration of CIRP prior to liquidation. Under newly inserted Section 33(1A), the Adjudicating Authority may, upon application by the CoC with 66% voting approval, restore the CIRP before passing a liquidation order. Such restored CIRP may continue for an additional period of up to 120 days. This provision aims to preserve value and provide an additional opportunity for resolution where liquidation may otherwise result in significant erosion of assets.
Secured Creditor Rights and Waterfall Distribution Changes
Under amended Section 52, secured creditors intending to realise security interests outside liquidation must inform the liquidator and identify secured assets within fourteen days, failing which such security interests may be deemed relinquished to the liquidation estate. Further, where multiple secured creditors hold security interests over the same asset, realisation requires the consent of creditors representing at least sixty-six per cent in value of secured claims.
The amendments to Section 53 clarify the treatment of partially secured creditors by recognising them as unsecured creditors for the unrecovered balance portion of debt. The amendments also clarify the treatment of government dues and introduce illustrations concerning contractual priority arrangements between creditors.
Creditor-Initiated Insolvency Resolution Process
One of the most transformative changes introduced by the Amendment Act is the insertion of a new Chapter IV-A establishing a “Creditor-Initiated Insolvency Resolution Process” (CIIRP). The new framework permits notified classes of financial institutions to initiate insolvency resolution processes for eligible corporate debtors through the appointment of a resolution professional, subject to prescribed approval thresholds. The framework differs materially from traditional CIRP, as under CIIRP, management of the corporate debtor may remain with the Board of Directors during the process, although the resolution professional receives substantial oversight powers, including the authority to attend meetings and to reject resolutions.
The framework also introduces mechanisms for objections by corporate debtors, moratorium applications, conversion into standard CIRP and prescribed completion timelines of 150 days, extendable by 45 days. The introduction of CIIRP indicates the intent to create a more flexible, creditor-driven and potentially faster restructuring mechanism for certain categories of debtors.
Liquidation and Dissolution Reforms
The Amendment Act also introduces various changes to liquidation and dissolution timelines. Liquidators are now required to liquidate all assets and apply for dissolution within 180 days of the liquidation commencement date, with an extension of up to 90 additional days. The amendments further clarify that pending proceedings relating to avoidance transactions or fraudulent trading may continue even after dissolution. The CoC is also empowered to determine how such proceedings and recoveries should be pursued and distributed. The amendments additionally introduce changes concerning secured creditors, the relinquishment of security interests, and the treatment of government dues within the waterfall mechanism.
Digitisation and Cross-Border Insolvency Provisions
The Amendment Act also introduces enabling provisions relating to digitisation and cross-border insolvency administration. The new Section 240B empowers the Central Government to establish an electronic portal for the administration and conduct of insolvency proceedings.
Additionally, Section 240C empowers the Central Government to frame rules for cross-border insolvency proceedings relating to notified classes of corporate debtors and notified jurisdictions. The provision contemplates recognition of foreign proceedings, judicial cooperation, assistance and coordination mechanisms.
In Conclusion
The Insolvency and Bankruptcy Code (Amendment) Act, 2026, represents one of the most extensive revisions to India’s insolvency framework since the enactment of the Code in 2016. The amendments collectively seek to improve procedural efficiency, strengthen creditor oversight, reduce delays, enhance accountability of insolvency professionals and preserve asset value during distress proceedings. The introduction of creditor-initiated insolvency resolution proceedings, expanded supervisory powers of the CoC, stronger avoidance transaction mechanisms and statutory extinguishment of claims reflect a clear policy objective of creating a more predictable and commercially efficient restructuring framework.
Authors – Manisha Singh (Partner) and Shivi Gupta (Associate Partner)