India’s insolvency law has undergone a structural tune-up, with the Insolvency and Bankruptcy Code (Amendment) Act, 2026 bringing sharper timelines, tighter withdrawal rules, and a more muscular role for creditors—stretching even into liquidation. ⚖️
At the heart of the amendment lies a recalibration of Section 12A, governing withdrawal of corporate insolvency resolution process (CIRP) proceedings. The revised framework shuts the door on withdrawals at two crucial stages: before the Committee of Creditors (CoC) is formed and after the first invitation for resolution plans is issued. The move curtails late settlements that often derailed timelines and prolonged uncertainty.
The 90-per-cent approval requirement from the CoC for withdrawal remains intact. However, adjudicating authorities must now decide such applications within 30 days, and any delay must be explained with recorded reasons—an attempt to restore discipline to a process that has frequently drifted off schedule. ⏳
The amendment doubles down on speed across the insolvency lifecycle. Applications filed by financial creditors, operational creditors, or corporate applicants must now be admitted or rejected within 14 days. Once default is established and the application is complete, rejection on unrelated grounds is no longer permitted, narrowing discretion and reinforcing predictability.
Perhaps the most consequential shift is the expansion of the CoC’s role beyond the resolution stage. Creditors will now have oversight during liquidation, a phase previously outside their formal domain. This redesign effectively keeps creditors in the driver’s seat even after rescue efforts fail, altering the balance of decision-making in the Code. 🔍
Dissenting financial creditors also receive stronger protection. The amendment ensures they receive at least the amount they would have obtained in liquidation, reinforcing fairness in resolution outcomes.
Another notable addition allows restoration of CIRP even after circumstances warrant liquidation. Subject to CoC approval, the adjudicating authority can permit revival attempts for up to 120 days—offering a last window for value maximisation before final closure.
The legislation also codifies principles that had emerged through court rulings. Avoidance proceedings and fraudulent trading actions will continue independently of CIRP or liquidation timelines. Additionally, approval of a resolution plan extinguishes all prior claims against the corporate debtor, while leaving liabilities of promoters and guarantors untouched.
Definitions across key provisions have been widened, including those relating to service providers, avoidance transactions, and fraudulent or wrongful trading. The law also clarifies that a security interest must arise from an agreement between parties, resolving a long-standing interpretational grey area.
Procedural refinements extend to the appointment of interim resolution professionals, verification of claims, and continuation of avoidance proceedings. Interim resolution professionals are now expressly empowered to determine claim values, enhancing their role in shaping the process.
A newly introduced Section 28A allows creditors, with CoC approval, to transfer assets of personal or corporate guarantors during CIRP. Meanwhile, changes to provisions governing resolution plans mandate minimum payouts to dissenting creditors, require recorded reasoning for CoC approvals, and safeguard licences and permits tied to approved plans. 📜
Taken together, the 2026 overhaul attempts to close loopholes, tighten timelines, and reinforce creditor control—signalling a shift toward a more structured, creditor-driven insolvency ecosystem.
