CIIRP: A New Insolvency Bill in India

Abstract

Companies facing financial distress and allegations of insolvency are governed by the Insolvency and Bankruptcy Code, 2016.[1] When a person’s or company’s liabilities exceed its assets and it becomes unable to pay its debts, it is termed insolvent. When a court examines those assets and formally determines that the entity cannot meet its obligations, it declares the entity bankrupt. While the Code places creditors in a central role, it has faced criticism for delays in proceedings. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 seeks to address these concerns. A key feature of the Bill is the Creditor-Initiated Insolvency Resolution Process (CIIRP), which enables creditors to initiate the insolvency resolution process without approaching the National Company Law Tribunal (NCLT). This article examines the CIIRP framework, the direction in which the proposed amendments seek to take the insolvency and bankruptcy process, and the implications for companies and stakeholders involved.

Keywords: Insolvency and Bankruptcy Code, Corporate Restructuring, Creditor Rights, CIIRP, IBC Amendment 2025.

Methodology

This study relies on secondary sources and legislative documents. A qualitative research methodology has been adopted.

Objectives

The objectives of this study are as follows:

1. To examine the reforms proposed by the Insolvency and Bankruptcy Code (Amendment) Bill, 2025.
2. To analyse the framework of the proposed CIIRP.
3. To assess the impact of the proposed legislation on creditors, companies, and associated stakeholders once the framework is operational.

I. Introduction

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, introduced in the Lok Sabha on August 12, 2025, proposes significant amendments to the Insolvency and Bankruptcy Code, 2016.[2] The Bill places emphasis on time-bound resolution of corporate insolvency, introducing a structured process to that end. Until an improved out-of-court mechanism is fully established, the process will continue to be supervised by the National Company Law Tribunal.

II. Legal Framework: Corporate Insolvency Resolution Process

Under the existing Corporate Insolvency Resolution Process (CIRP), the debtor or the creditor approaches the National Company Law Tribunal to initiate proceedings.[3] Once the Tribunal admits the application, an Interim Resolution Professional takes charge of the company and constitutes a Committee of Creditors. The Committee then determines the course of action. The prescribed time limit for completion of CIRP is 180 days. However, litigation and court proceedings can interrupt and slow down the process, often diminishing the value of the company’s assets in the interim. Several experts have called for a faster mechanism for corporate restructuring. The Insolvency and Bankruptcy Code, 2016 continues to serve as the governing framework for all such proceedings.

III. Creditor-Initiated Insolvency Resolution Process (CIIRP)

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 proposes the Creditor-Initiated Insolvency Resolution Process (CIIRP), under which creditors may initiate insolvency resolution without approaching a tribunal. The proposed Sections 58A to 58K of the Code are intended to empower certain financial creditors to commence this process.[4]

To initiate CIIRP, the following conditions must be satisfied:

1. Threshold Requirement: Creditors representing at least 51 percent of the total debt must collectively initiate the process.
2. Notice to Debtor: A formal notice must be issued to the corporate debtor, affording it an opportunity to respond.
3. Appointment of Resolution Professional: Once a Resolution Professional is appointed and a public announcement is made, the process formally commences.

During the resolution period, the corporate debtor retains control of its management. The board of directors continues to run the company, subject to oversight by the creditors and the Resolution Professional. This arrangement is designed to ensure business continuity throughout the insolvency resolution process.

The process must be concluded within 150 days. An extension of 45 days may be granted if approved by the Committee of Creditors. If no resolution plan is approved within this period, the matter is transferred to the CIRP mechanism before the NCLT.

CIIRP is designed to benefit both creditors and the corporate debtor by facilitating a faster, less adversarial resolution outside the formal tribunal process.

IV. Advantages of CIIRP

1. Reduced Reliance on Courts: CIIRP reduces dependence on the NCLT and enables faster resolution of financially distressed entities. Since creditors can initiate the process without immediately approaching the court, delays are reduced and the burden on tribunals is eased.

2. Early Intervention: The framework encourages creditors to act before a company’s financial condition deteriorates further, thereby preserving the company’s value and improving prospects for debt recovery.

3. Operational Continuity: Since existing management continues to run the business during the process, disruption to operations is minimised.

4. Strengthened Creditor Rights: CIIRP reinforces the creditor-driven philosophy of the Insolvency and Bankruptcy Code, 2016, supporting efficient and timely resolution.

V. Criticisms of CIIRP

1. Limited Judicial Oversight: A significant concern is the absence of court supervision at the initial stage. Since the process begins without direct oversight from a tribunal, disputes regarding procedure and conduct may go unchecked.

2. Disproportionate Creditor Influence: There is a risk that majority creditors may exercise undue influence over the process, leaving minority creditors or operational creditors with little say in the resolution outcome.

3. Independence of Resolution Professional: The process functions effectively only if the Resolution Professional exercises independent judgment. Any compromise of this independence would be contrary to the principles of natural justice. Additionally, since the company continues under the control of its existing management during the process, the risk of management interference is a genuine concern.

4. Risk of Process Duplication: If CIIRP proceedings fail and cases are transferred to CIRP before the NCLT, procedural steps may need to be repeated. This duplication could undermine the efficiency that the reform seeks to achieve.

VI. Comparative Perspective

Several jurisdictions have developed out-of-court debt resolution mechanisms that reduce pressure on the courts. The United Kingdom’s Scheme of Arrangement allows companies and their creditors to reach a binding restructuring agreement with limited court involvement.[5] In the United States, the pre-packaged bankruptcy process enables companies to negotiate and finalise a restructuring plan with creditors before formally filing for bankruptcy protection.[6]

These processes allow creditors and debtors to agree on a repayment or restructuring plan before formal court proceedings commence, thereby minimising judicial intervention. Creditors are placed in charge of the restructuring, with the court stepping in only at the final stage, if at all.

India’s ambition to become a hub for commercial dispute resolution, including arbitration and conciliation, aligns with this broader trend toward faster, out-of-court resolution of financial disputes. Such mechanisms offer the parties involved a more certain timeline and reduce the costs associated with prolonged court proceedings.

For these processes to function effectively, clear rules must be established and experienced insolvency professionals must lead the resolution. All stakeholders must play an active and responsible role. If implemented properly, CIIRP could make a meaningful contribution to strengthening India’s insolvency framework.

VII. Supporting Authority

Section 7 of the Insolvency and Bankruptcy Code, 2016 governs the initiation of the Corporate Insolvency Resolution Process by a financial creditor.[7] Sections 9 and 10 address applications by operational creditors and corporate applicants respectively, providing a broad base of standing and enabling courts to play an active role in shaping insolvency law.

In Innoventive Industries Ltd. v. ICICI Bank Ltd.,[8] the Supreme Court held that at the admission stage, the Tribunal need only verify that a default has occurred. In Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta,[9] the Court affirmed the primacy of commercial wisdom of the Committee of Creditors in the resolution process.

The CIIRP framework is grounded in the principle that creditors should have the authority to lead the restructuring of distressed companies. This philosophy is consistent with the creditor-driven approach that underpins the Insolvency and Bankruptcy Code, 2016, and is reinforced by the proposed Insolvency and Bankruptcy Code (Amendment) Bill, 2025.

Conclusion

CIIRP represents a significant shift in India’s approach to corporate insolvency, enabling creditors to initiate restructuring outside the court system. It aims to reduce the burden on tribunals and preserve the value of financially distressed businesses. The framework reflects a move toward a flexible, market-based approach to insolvency resolution, placing creditors in a position of greater responsibility and authority.

The process is initiated by creditors upon corporate debtor default. The board of directors continues to manage the company while the Committee of Creditors supervises the resolution process, with oversight from the Resolution Professional to ensure compliance. The target timeline is 150 days, with a possible extension of 45 days in justified cases approved by the Committee of Creditors. In cases where the process fails, the matter is transferred to CIRP before the National Company Law Tribunal.

CIIRP draws from international best practices and reflects India’s commitment to aligning its insolvency framework with global standards. However, its success depends on effective implementation and robust regulatory safeguards. Concerns regarding disproportionate creditor power and the integrity of the resolution process cannot be overlooked. Regulatory authorities must address these through clear rules and proper supervision. If utilised effectively, CIIRP has the potential to strengthen India’s insolvency system, improve recovery rates, enhance investor confidence, and contribute to a more efficient and resilient financial ecosystem.

References

[1] The Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (2016).
[2] The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, introduced in Lok Sabha on August 12, 2025 (India). 
[3] The Insolvency and Bankruptcy Code, No. 31 of 2016, §§ 7, 9, 10, INDIA CODE (2016).
[4] The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, §§ 58A–58K (proposed) (India). 
[5] Companies Act 2006, c. 46, §§ 895–901 (U.K.) (Scheme of Arrangement).
[6] 11 U.S.C. § 1126(b) (2018) (Pre-packaged bankruptcy plan).
[7] The Insolvency and Bankruptcy Code, No. 31 of 2016, § 7, INDIA CODE (2016).
[8] Innoventive Industries Ltd. v. ICICI Bank Ltd., (2018) 1 SCC 407 (India).
[9] Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531 (India).