Govt to soon float cabinet note on IBC amendments; bill likely in Monsoon Session

The government is set to float a cabinet note within the next two weeks, outlining key amendments to the Insolvency and Bankruptcy Code (IBC), according to sources in the Ministry of Finance. The bill is expected to be tabled during the upcoming monsoon session of Parliament.

One of the major reforms under consideration is likely the introduction of a Creditor-Led Resolution Process (CLRP) aimed at expediting debt resolution while reducing reliance on the National Company Law Tribunal (NCLT). Unlike the existing Corporate Insolvency Resolution Process (CIRP), which involves extensive judicial oversight, CLRP would empower financial creditors to take the lead in resolving distressed assets. The government may also introduce a 165-day resolution window, significantly shorter than the current 330-day limit under CIRP, to facilitate swifter settlements.

Another key amendment seeks to extend the pre-packaged insolvency resolution framework to larger corporations. Originally designed for Micro, Small, and Medium Enterprises (MSMEs), this framework enables faster and more cost-effective resolutions. Expanding its scope to larger firms is expected to streamline insolvency proceedings and improve recovery rates.

Additionally, the government is exploring group insolvency mechanisms to allow corporate groups to undergo a unified resolution process. The current fragmented approach, where each entity within a group faces separate proceedings, often leads to inefficiencies and prolonged timelines. A consolidated framework could enhance coordination and optimise outcomes.

The government had previously considered introducing cross-border insolvency norms and a project-by-project insolvency framework for real estate, but sources indicate that these proposals may require further consultations.

Meanwhile, discussions on the Companies (Amendment) Bill 2024 are still ongoing and a cabinet note will be floated on this after the consultation process.