12 months ago
Government Proposes Bankruptcy Law Changes for Quicker Turnarounds
Imagine companies that are in financial trouble.
Right now, when these companies try to get back on their feet, it can take a long time because the people who lent them money (creditors) sometimes argue over how to split the money.
The government wants to speed things up.
They're proposing a new law.
This law would let a special court (tribunal) approve the company's plan to get better, even if the creditors are still fighting.
The court would sort out the money disputes later.
This should save time and help struggling companies recover faster.
This is similar to giving the company a head start, then figuring out the details later.
Some experts think this will help, while others worry it might cause new problems.
The government proposed changes to India's bankruptcy law to speed up company turnarounds.
The amendment allows tribunals to approve revival plans before resolving disputes among creditors.
The Insolvency and Bankruptcy Board of India (IBBI) will create regulations for this process.
The change aims to prevent delays like those seen in cases such as Essar Steel Ltd.
The average time for company turnaround under the IBC was 602 days (until June 2025).
- Who
- Government and Insolvency and Bankruptcy Board of India (IBBI).
- What
- Proposed changes to the bankruptcy law to expedite the turnaround of insolvent companies.
- Where
- India
- When
- The amendment may be taken up during the winter session of parliament after review by a select committee.
- Why
- To facilitate quicker resolution of company revival plans by addressing delays caused by lender disputes.
Key facts
- Proposed Amendment
- Insolvency and Bankruptcy Code (Amendments) Bill, 2025
- Key Change
- Tribunals can approve revival plans before resolving creditor disputes
- Objective
- Faster turnaround of insolvent companies
- Expected Impact
- Reduce delays caused by inter-creditor disputes
- Examples of Delayed Cases
- Essar Steel Ltd, Jaypee Infratech Ltd, Reliance Infratel Ltd
- Average Time for Turnaround (till June 2025)
- 602 days
- Next Steps
- Review by a select committee, possible discussion in Parliament
Quotes
Soumitra Majumdar
Partner at JSA Advocates and Solicitors
“One major bottleneck we have been facing in the case of bankrupt businesses is inter-creditor disputes.”
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“In the case of distribution of proceeds of debt resolution and validity of inter-creditor arrangements, there have been disputes.”
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Yogendra Aldak
Executive partner at law firm Lakshmikumaran and Sridharan
“The amendment might face implementation challenges, as by separating the approval of the resolution plan from distribution of proceeds, the creditors may initiate parallel litigation over their share and the same may lead to conflicting judgments or legal uncertainty.”
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“a procedural loophole and upholding the commercial primacy of the committee of creditors while safeguarding judicial oversight over distribution disputes in a segregated and efficient manner”
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Anisha Jhunjhunwala
Senior consultant-IBC at NPV Insolvency Professionals Pvt. Ltd.
“This ensures implementation can begin on time, in line with the IBC’s objective of swift resolution.”
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“The amendment directly targetsthesedelays.”
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A person aware of the discussions within the government
One of the persons quoted
“This flexibility saves valuable time in the revival of the company, which otherwise could be lost to years of litigation.”
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Sources
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