Lok Sabha clears Insolvency and Bankruptcy Code (Amendment) Bill

New Delhi: The Lok Sabha Monday approved the Insolvency and Bankruptcy Code (Amendment) Bill, aimed at speeding up insolvency proceedings to resolve cases related to defaulting companies.

The Bill introduces a mandatory 14-day timeline for admitting insolvency applications once a company’s default has been established.

Finance Minister Nirmala Sitharaman said that the government has proposed a set of 12 amendments to the Insolvency and Bankruptcy Code to further strengthen the resolution ecosystem.

Sitharman said the primary reason for IBC resolution delays is extensive litigation, and the IBC Bill proposes penalties to prevent abuse of process.

The Lok Sabha took up the Bill moved by Finance Minister Nirmala Sitharaman for discussion March 27. The Bill, which was initially referred to a Select Committee, has been introduced to address the delays in resolving cases related to the insolvency and bankruptcy of a company or individual.

FM Sitharaman said in the Lower House that the Insolvency and Bankruptcy Code (IBC) has played a key role in improving the health of the banking sector, while underlining that the law was never intended to function as a debt recovery mechanism.

Speaking in the Lok Sabha while piloting the Bill, the finance minister said the IBC has contributed to better credit discipline and improved the credit profile of companies.

The minister said companies have been doing well, and their corporate governance practices have also improved after coming out of the insolvency resolution process.

She made the remarks while replying to the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, as reported by the Select Committee. “The Insolvency and Bankruptcy Code, which came into force in 2016, has been a main factor in improving the overall health of the Indian banking sector,” Sitharaman said, adding that the framework has also helped companies achieve better credit ratings over time.

At the same time, she said the objective of the law is the resolution of stressed assets and not merely the recovery of dues. “IBC is a framework for rescuing viable businesses and resolving financial stress while preserving the enterprise value. IBC was never intended to be a debt recovery tool,” she explained.