Insolvency and Bankruptcy Code (Amendment) Bill 2025 – A Comparative Analysis

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 marks a transformative shift in India’s insolvency landscape, introducing targeted reforms to improve efficiency, fairness, and global alignment. From expanding the Pre-Packaged Insolvency Resolution Process (PPIRP) to all corporates, to creating a comprehensive group insolvency framework and redefining the waterfall distribution mechanism, the changes aim to protect diverse stakeholders while expediting resolutions. Key provisions address real estate sector challenges, enhance Resolution Professional accountability, and integrate cross-border insolvency rules. Together, these reforms strengthen creditor confidence, preserve enterprise value, and bring India’s insolvency regime closer to international best practices.

Expansion of Pre-Packaged Insolvency Resolution Process (PPIRP)

The IBC Amendment Bill 2025 has significantly widened the scope of the Pre-Packaged Insolvency Resolution Process (PPIRP). Earlier, this mechanism was restricted to Micro, Small, and Medium Enterprises (MSMEs), offering them a faster, cost-effective alternative to the regular Corporate Insolvency Resolution Process (CIRP). Now, through amendments to Sections 54A, 54B, and 54C, the PPIRP framework is available to all classes of corporate debtors, including large corporations.

A key requirement introduced is the submission of a base resolution plan before initiating PPIRP. This ensures that there is a concrete starting point for negotiations with creditors, reducing uncertainty and expediting decision-making.

The broader accessibility of PPIRP is expected to significantly speed up corporate debt resolutions. Large companies facing financial distress can now use this streamlined process to restructure liabilities without the prolonged delays and reputational damage often associated with traditional insolvency proceedings.

Additionally, PPIRP’s expanded reach encourages proactive restructuring, allowing businesses to address financial stress at an early stage, before defaults escalate into severe insolvency. This reform not only enhances creditor recoveries but also preserves enterprise value, safeguarding jobs and stakeholder interests in the process.

Comprehensive Group Insolvency Regime

The Insolvency and Bankruptcy Code Amendment Bill 2025 introduces a Comprehensive Group Insolvency Framework through new provisions in Sections 60B–60G. This regime acknowledges the interconnected nature of modern corporate structures, where multiple entities within a group often share financial obligations, guarantees, or operational dependencies.

Under these provisions, a “corporate group” is defined to include holding companies, subsidiaries, associates, and other substantially interconnected entities. The framework allows such entities to undergo a consolidated or coordinated Corporate Insolvency Resolution Process (CIRP) before the National Company Law Tribunal (NCLT). This means that instead of multiple fragmented proceedings, related companies can be resolved in a single, streamlined process.

The law enables the appointment of a common Resolution Professional (RP) and the formation of a joint or coordinated Committee of Creditors (CoC) for group entities. This ensures consistent decision-making and efficient management of intertwined assets and liabilities. Importantly, safeguards are built in to exclude solvent group entities from insolvency proceedings, protecting healthy businesses from unnecessary disruption.

The group insolvency regime promotes holistic resolution, maximizes asset value, and reduces conflicting rulings across jurisdictions. For large conglomerates with cross-linked debts, it represents a practical, value-driven approach to corporate restructuring.

Revised CIRP Initiation Thresholds

These revised limits serve two main purposes:

• Preventing misuse of the Insolvency and Bankruptcy Code as a recovery tool for small disputes.
• Optimizing NCLT bandwidth to handle only material defaults that impact larger creditor groups and corporate viability.

By refining thresholds, the amendment enhances efficiency, encourages out-of-court settlements for minor defaults, and maintains the focus on serious insolvency cases.

Project-wise Real Estate Insolvency

The Insolvency and Bankruptcy Code Amendment Bill 2025 introduces a crucial reform for the real estate sector through Sections 25A(3A), 25B, and 5(8)(f), enabling project-wise insolvency resolution. Under the earlier framework, if a real estate developer faced insolvency, the entire company, along with all its ongoing projects, would be dragged into the Corporate Insolvency Resolution Process (CIRP). This often led to unnecessary delays, stalled viable projects, and adversely affected unrelated homebuyers.

The amendment now allows CIRP to be initiated on a per-project basis, meaning each real estate project is treated as an independent unit. An independent Resolution Professional (RP) and a separate Committee of Creditors (CoC) will be appointed for each project under insolvency. This ring-fencing mechanism ensures that financially healthy projects are insulated from the insolvency proceedings of other troubled projects by the same developer.

Importantly, homebuyers retain their legal status as financial creditors. This safeguards their voting rights in the CoC and ensures they have a say in the resolution process, while also preserving their repayment or possession claims.

This targeted approach enhances resolution efficiency, protects the interests of genuine homebuyers, and promotes timely completion of viable projects without unnecessary legal entanglement.

Mandatory E-Auctions for Asset Sales

The Insolvency and Bankruptcy Code Amendment Bill 2025 mandates that all asset sales during resolution and liquidation processes, under Sections 35 and 52, must be conducted through e-auctions. This reform replaces discretionary or offline sale methods with a fully digital, transparent process. E-auctions encourage competitive bidding, ensuring assets are sold at optimal market value, thereby maximizing recoveries for creditors. The digital format also creates an auditable trail, reducing the scope for disputes or allegations of bias. By standardizing sale procedures, this measure enhances stakeholder confidence, accelerates transactions, and aligns India’s insolvency framework with global best practices in asset disposition.

Overhaul of the Waterfall Distribution Mechanism (Section 53)

The Insolvency and Bankruptcy Code Amendment Bill 2025 introduces a significant restructuring of the waterfall distribution mechanism under Section 53, redefining the order in which proceeds from insolvency resolution or liquidation are distributed.

The new priority order begins with CIRP and liquidation costs, followed by workmen’s dues and secured creditors who have relinquished their security. A landmark change is the inclusion of homebuyers’ dues, placed pari passu (equal footing) with secured financial creditors, ensuring stronger protection for this vulnerable group. Dissenting financial creditors are also guaranteed a minimum payout equivalent to their share in a liquidation scenario.

Further down the hierarchy, unsecured financial creditors take precedence over operational creditors, who now rank above government/statutory dues, a shift aligning with global insolvency norms. Government claims are thus deprioritized, signaling a more creditor-friendly framework. The final tiers include preference shareholders, and lastly, equity shareholders or partners.

These changes deliver three major outcomes:

1. Elevated protection for homebuyers through explicit statutory recognition.
2. Improved position for operational creditors, enhancing recovery prospects.
3. Stronger safeguards for minority lenders, reducing the risk of unfair treatment in resolution plans.

Overall, the reform aims to create a more balanced, fair, and value-maximizing insolvency process.

Enhanced Resolution Professional (RP) Accountability

The IBC Amendment Bill 2025 strengthens the role and oversight of Resolution Professionals (RPs) by expanding their responsibilities in group insolvency cases, project-wise real estate resolutions, and asset sales. RPs are now expected to manage complex, multi-entity proceedings with greater transparency and efficiency. A new code of conduct sets higher ethical and professional standards, while formal grievance redress mechanisms allow stakeholders to raise concerns over RP conduct. These measures aim to improve accountability, reduce disputes, and enhance stakeholder trust, ensuring that the insolvency process is handled with integrity, competence, and fairness in line with global best practices.

Voluntary Liquidation & Cross-Border Insolvency

The IBC Amendment Bill 2025 streamlines voluntary liquidation under Section 59 by introducing faster, time-bound payout schedules, enabling solvent companies to close operations efficiently. Additionally, Part Z (Sections Z1–Z20) establishes a framework for cross-border insolvency aligned with the UNCITRAL Model Law. This allows Indian courts to recognize and cooperate with foreign insolvency proceedings, and vice versa, fostering judicial coordination across jurisdictions. These reforms enhance creditor confidence, attract foreign investment, and position India’s insolvency framework on par with global standards, ensuring smoother resolution of cases involving assets and creditors spread across multiple countries.

Conclusion

The IBC Amendment Bill 2025 is not merely a procedural update but a strategic overhaul designed to balance stakeholder interests and modernize India’s insolvency framework. By setting clearer priorities, raising initiation thresholds, protecting vulnerable groups like homebuyers, and enabling group-wide resolutions, it ensures more predictable and equitable outcomes. Mandatory e-auctions, digital process mandates, and time-bound procedures will enhance transparency and efficiency. With the inclusion of cross-border provisions, India signals readiness to handle complex global cases. For corporates, creditors, and investors alike, adapting to these reforms will be key to leveraging their benefits and navigating the evolving insolvency landscape successfully.