Centre introduces insolvency law Amendment Bill in Lok Sabha

New Delhi: The government on Tuesday introduced a bill in the Lok Sabha to amend the insolvency law, proposing an out-of-court mechanism to address genuine business failures, group and cross-border insolvency frameworks.

Finance and Corporate Affairs Minister Nirmala Sitharaman introduced the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, which was later referred to a select committee of the House, following the request of the minister.

In the Statement of Objects and Reasons for the bill, the minister said the proposed changes aim to reduce delays, maximise value for all stakeholders, and improve governance of all processes under the Code.

The much-awaited bill has proposed a “creditor-initiated insolvency resolution process”, with an out-of-court initiation mechanism for genuine business failures to facilitate faster and more cost-effective insolvency resolution with minimal business disruption. “Once implemented, this will help ease the burden on judicial systems, promote ease of doing business and improve access to credit,” Sitharaman said.

Besides, the government has proposed the group insolvency framework that seeks to efficiently resolve insolvencies, involving complex corporate group structures, minimising value destruction caused by fragmented proceedings and maximising value for creditors through coordinated decision-making.

According to the bill, the cross-border insolvency framework seeks to lay the foundation for protecting stakeholder interests in domestic and foreign proceedings, promoting investor confidence and aligning domestic practices with international best practices. This will also pave the way for improved recognition of Indian insolvency proceedings in other jurisdictions. After introducing the bill amid din in the Lower House, Sitharaman urged the Chair to refer the bill to the select committee of the House.

Various amendments proposed in the bill were decided upon after extensive stakeholder consultations, and back in January 2023, the government issued a discussion paper to seek stakeholder inputs on further improving the Code.

The Code, introduced in 2016, provides for a market-linked and time-bound resolution of stressed assets. So far, it has undergone six legislative interventions since its enactment, and the last amendment was made in 2021.

After the first amendment in 2017, the Code was also amended once in 2018, twice in 2019 and once in 2020.