I had written in these pages last September, when the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 was placed before Parliament, that it was a step forward, but not the final word.

The Bill was then passed by both the Houses and received Presidential assent on 6th April. It is law now. 

And it is a good law.

And the government has shown, yet again, that it is willing to listen and keep iterating. IBC has been amended seven times in less than a decade. At least that suggests an unusual degree of institutional responsiveness. This is not a Code sitting  on a shelf. It is an evolving scheme, one that is from time to time  moulded by experience.

What the Act gets right

The new Act provides a number of long-awaited fixes. Insolvency application must be admitted within 14 days. Decisions of resolution plans within 30 days. A 180-day window for liquidation. A creditor-led insolvency resolution process that shifts commercial judgments from overstretched tribunals to boardrooms. Group insolvency and cross-border frameworks that synchronize India with global practice.

The new  rule of a “clean slate” means that once a resolution plan is approved, all past dues and claims are wiped out. This will instill confidence in new investors that they won’t be burdened with old liabilities after taking over a company. The IBC has rehabilitated more than 1,370 companies with recoveries of over Rs 4 lakh crore, according to the Finance Ministry. The system is working. These amendments should make it function better.

Speed must come with balance

However, there is one dimension that merits some careful consideration.

Mandatory admission within 14 days avoids delay at the entry gate. That is its strength. But it also means that a creditor can now initiate insolvency proceedings against a company with nothing worse than what is essentially a short-term cash flow disruption. A single regulatory move, a supply chain disruption, a tariff hike, or even a situation like the current West Asia crisis disrupting trade routes and energy markets can create a temporary mismatch between a company’s obligations and its available liquidity.

That is not insolvency. That is business.

As Joseph Schumpeter wrote in Capitalism, Socialism and Democracy: “Situations emerge in the process of creative destruction in which many firms may have to perish that nevertheless would be able to live on vigorously and usefully if they could weather a particular storm.” That observation, which was made more than eight decades ago, summarizes the danger of mistaking temporary stress for structural failure. The admission bar has to differentiate between the two. The law must protect creditors. It must equally protect enterprise.

The conversation that must continue

One of the earliest and arguably, the most crucial reform that the Act is yet to embark on concerns Section 29A.

I raised this last September. I mention it again, not as a criticism but as encouragement. The government has demonstrated that it is open to keeping this Code fluid. It will be a reform for which the time is eventually ripe.

This provision under Section 29A prohibits promoters of defaulting companies from bidding for their own assets. The intention was correct to stop willful defaulters from gaming the system. That guardrail must stay. But the provision does not draw a distinction between a promoter who engineered a default and one whose business was caught in a systemic crisis. No one knows a company better than the person who built it. The promoter is often in the best position to provide a viable solution.

 If the law punishes failure too severely, the risk-taking appetite of entrepreneurs ceases. Promoters can engage in resolution processes under supervised regimes in both the UK and US. India, while striving for Viksit Bharat by 2047,  must not shy away from emulating these practices. MSME promoters may still be allowed to bid for their assets, the government has indicated. That is a welcome start. It needs to be extended, with proper safeguards, to the wider economy.

A question on liquidation

One structural point. The Act confers wide powers on the Committee of Creditors in respect of liquidation, including the power to recommend and replace the liquidator. But if the CoC could not reach a resolution under the resolution professional, then what really changes during liquidation? International experience shows that once a company is in liquidation, better outcomes are achieved if an independent authority with predetermined powers and timeframes takes over. India should consider this.

The road ahead

The IBC Amendment Act, 2026 is a major and prudent reform. The trajectory is right. It is genuinely laudable that the government is committed to strengthening a world class insolvency regime.

But the best are those frameworks that continue to evolve. The IBC has demonstrated its ability to do just that. Section 29A, the admission threshold and the role of independent oversight in liquidation are not objections. They are the next chapters.

The Code has evolved since 2016. It will go further. The bedrock of trust has already been established.

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