Context:
The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 is expected to be introduced in the second half of the Budget Session of Parliament, beginning March 9, to strengthen the insolvency resolution framework in India.
Key Highlights:
Introduction of the Amendment Bill
- The bill will amend the Insolvency and Bankruptcy Code (IBC).
- A Parliamentary Committee has already submitted its report.
- The Finance Minister has confirmed the government’s intention to introduce the bill.
Purpose of the Amendments
- Address emerging challenges in insolvency resolution processes.
- Incorporate lessons from previous insolvency cases.
- Improve efficiency, speed, and transparency of the resolution mechanism.
Importance for the Economy
- Strengthens credit discipline and financial stability.
- Helps improve ease of doing business in India.
- Encourages investor confidence and faster resolution of stressed assets.
Relevant Prelims Points:
- Insolvency and Bankruptcy Code (IBC), 2016
- Comprehensive law for insolvency resolution of companies, partnerships, and individuals.
- Replaced multiple earlier laws to create a unified insolvency framework.
- Key Institutions under IBC
- Insolvency and Bankruptcy Board of India (IBBI) – regulatory authority.
- National Company Law Tribunal (NCLT) – adjudicating authority for companies.
- Debt Recovery Tribunal (DRT) – for individuals and partnerships.
- Insolvency Professionals (IPs) – manage insolvency resolution.
- Corporate Insolvency Resolution Process (CIRP)
- Initiated when a company defaults on debt.
- Intended resolution timeline: 330 days including legal proceedings.
- Insolvency vs Bankruptcy
- Insolvency: Inability to repay debts.
- Bankruptcy: Legal declaration of insolvency through court proceedings.
Relevant Mains Points:
Significance of the IBC
- Consolidated fragmented insolvency laws.
- Ensured time-bound resolution of stressed assets.
- Strengthened credit culture in the banking sector.
- Reduced Non-Performing Assets (NPAs).
Challenges in IBC Implementation
- Delays in resolution due to litigation.
- Capacity constraints in NCLT and DRT.
- Low recovery in some cases.
- Complex cross-border insolvency issues.
Way Forward
- Improve institutional capacity of NCLT and insolvency professionals.
- Introduce clear guidelines for cross-border insolvency cases.
- Enhance transparency and accountability in resolution processes.
- Promote pre-packaged insolvency frameworks for faster resolution.
UPSC Relevance:
- GS 2: Polity – Parliamentary process and economic legislation
- GS 3: Economy – Financial sector reforms and insolvency framework