The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026) received the assent of the President on 06.04.2026 and was published in the Gazette of India, Extraordinary, on the same date. The Amendment Act introduces 72 clauses amending over 50 sections of the Insolvency and Bankruptcy Code, 2016. It will come into force on such date as the Central Government may appoint by notification, with the possibility of different dates for different provisions. This post summarises the key highlights.
Creditor-Initiated Insolvency Resolution Process (New Chapter IV-A)
The most significant structural addition is an entirely new resolution track under Chapter IV-A (Sections 58A to 58K). This creditor-initiated insolvency resolution process is designed for smaller corporate debtors, specifically those with assets or income below prescribed levels, or with a particular class of creditors or quantum of debt as notified by the Central Government.
Under this framework, a financial creditor belonging to a notified class of financial institutions may initiate the process by appointing a resolution professional directly, without filing an application before the NCLT. Before doing so, the financial creditor must obtain approval of financial creditors representing not less than 51% in value of debt, inform the corporate debtor and give it at least 30 days to make a representation, and then obtain fresh approval from the same class of creditors after considering the representation.
The management of the corporate debtor continues to vest in its Board of Directors or partners during the process. However, the resolution professional has the right to attend meetings of the Board and reject any resolution passed by it. There is no automatic moratorium; instead, the resolution professional may apply to the NCLT for a moratorium after obtaining CoC approval.
The process must be completed within 150 days, extendable by 45 days with 66% CoC approval. If no resolution plan is approved within this period, or if the corporate debtor fails to cooperate, the NCLT shall convert the process into a full corporate insolvency resolution process under Chapter II. Importantly, during a creditor-initiated process, no application for CIRP or pre-packaged resolution under Sections 7, 9, 10, or 54C can be filed or admitted for the same corporate debtor.
Strict Timelines with Mandatory Recording of Delays
The Amendment Act introduces enforceable timelines across the resolution and liquidation process. Under the substituted Section 7(5), the NCLT must admit or reject a Section 7 application within 14 days. If the order is not passed within this period, the reasons for delay must be recorded in writing. A similar 14-day timeline now applies to applications under Sections 9 and 10.
Two important explanations have been added to Section 7. Explanation I clarifies that where the requirements of Section 7(2) have been complied with, no other ground shall be considered to reject the application. Explanation II provides that a record of default from an information utility furnished with the application shall be considered sufficient for the NCLT to ascertain default.
Further timelines include 30 days for the NCLT to pass orders on resolution plans under Section 31, 30 days for liquidation orders under Section 33, 180 days for the liquidator to complete liquidation and apply for dissolution under Section 54 (extendable by 90 days), and 3 months for NCLAT to dispose of appeals under Section 61.
Resolution Plan Framework Strengthened
The definition of “resolution plan” under Section 5(26) has been expanded to include the sale of one or more assets of the corporate debtor through one or more plans proposed by one or more resolution applicants, subject to conditions as may be specified. This codifies asset-sale-based resolution as a formal path within the CIRP framework.
Section 30 now includes a new clause (ba) that mandates minimum payment to dissenting financial creditors (those who do not vote in favour of the plan). The payment shall not be less than the lower of (i) the amount payable in a liquidation under Section 53, or (ii) the amount that would have been payable if the resolution amount were distributed per the Section 53 waterfall. An explanation clarifies that the distribution must be “fair and equitable.”
Section 31 now allows the NCLT, on an application by the resolution professional with 66% CoC approval, to first approve the implementation of the resolution plan and thereafter approve the manner of distribution within 30 days. The NCLT may also, before rejecting a plan, give notice to the CoC to rectify defects.
A new sub-section (5) of Section 31 provides that upon approval of a resolution plan, any licence, permit, registration, quota, concession, clearance, or similar grant associated with the plan shall not be suspended or terminated during the remaining period of such grant, provided the corporate debtor or the resolution applicant complies with the obligations in respect of such grant.
Restoration of CIRP as Alternative to Liquidation
A new sub-section (1A) of Section 33 permits the NCLT, before passing a liquidation order, to consider an application by the CoC (with 66% approval) for restoring the CIRP. If the ground for liquidation is that no resolution plan was received within the Section 30 timeline, the NCLT may restore the CIRP for a period not exceeding 120 days. If the ground is non-cooperation by the corporate debtor, the NCLT may restore the CIRP to the stage of invitation for resolution plans. This restoration can be availed only once.
Additionally, the NCLT may now declare a moratorium during liquidation proceedings, subject to the provisions of Section 52, for the purposes referred to in Section 14(1) read with Section 14(3).
Committee of Creditors to Supervise Liquidation
Under a new sub-section (11) of Section 21, the CoC constituted during CIRP shall continue to function during liquidation and shall supervise the conduct of the liquidation by the liquidator. The Board may specify other classes of creditors who may attend CoC meetings during liquidation, though without voting rights.
Section 34 has been overhauled. The IBBI will now recommend the liquidator (rather than the resolution professional being automatically appointed). A resolution professional who served during the CIRP of a corporate debtor cannot be appointed as its liquidator. A new Section 34A empowers the CoC, by a vote of not less than 66%, to resolve to replace the liquidator with another insolvency professional.
Transfer of Guarantor Assets During CIRP (New Section 28A)
A new Section 28A allows a creditor who has taken possession of an asset of a personal or corporate guarantor by enforcing its security interest to transfer that asset as part of the resolution of the corporate debtor, with CoC approval. Where the corporate guarantor is itself undergoing CIRP or liquidation, the transfer requires 66% CoC approval of the guarantor’s creditors. Where the personal guarantor is undergoing insolvency or bankruptcy and has forfeited or surrendered the asset, the transfer requires approval of more than three-fourths in value of the personal guarantor’s creditors. The amount received from the transfer is adjusted against the guarantor’s debt, and any surplus is returned to the guarantor.
Avoidance Transaction Framework Overhauled
Sections 38 to 42 of the Code have been omitted entirely. The new Section 47 consolidates the application framework. Where a preferential transaction (Section 43), an undervalued transaction (Section 45), an extortionate credit transaction (Section 50), or fraudulent or wrongful trading (Section 66) has occurred and the liquidator or resolution professional has not reported it, a creditor, member, or partner may directly apply to the NCLT for appropriate orders. If the NCLT finds that the professional failed to report despite having sufficient information, it shall pass an order requiring the Board to initiate disciplinary proceedings against such professional.
Section 26 has been substituted to clarify that the filing of an avoidance transaction application, fraudulent or wrongful trading application, or an application under Section 47 shall not affect the CIRP or liquidation process. An explanation confirms the converse as well: completion of CIRP or liquidation shall not affect the continuation of avoidance or trading proceedings.
Criminal Offences Replaced by Civil Penalties
Sections 74 and 76, which provided for criminal prosecution and imprisonment, have been omitted. In their place, Section 235A has been substituted with a comprehensive civil penalty regime. The NCLT may impose a penalty of not less than Rs. 1,00,000 per day of continuing contravention, extending up to three times the loss caused or three times the unlawful gain (whichever is higher). Where the loss or gain is not quantifiable, the total penalty shall not exceed Rs. 5,00,000,00 (Rs. 5 crore).
New penalty provisions have also been inserted for specific violations: Section 64A (Rs. 1 lakh to Rs. 2 crore for frivolous or vexatious proceedings under Part II), Section 67B (penalties up to Rs. 2 crore for contravention of moratorium or resolution plan terms), Section 67C (penalties up to Rs. 2 crore for operational creditors who conceal disputes or prior payment), and Section 183A (mirroring Section 64A for proceedings under Part III).
Group Insolvency and Cross-Border Insolvency
A new Chapter VA (Section 59A) empowers the Central Government to prescribe rules for conducting insolvency proceedings where two or more corporate debtors forming part of a group are simultaneously in insolvency. The rules may provide for a common Bench, coordination between CoCs, appointment of a common insolvency professional, formation of a combined creditors’ committee, and binding coordination agreements. A “group” is defined as two or more corporate debtors interconnected by control or significant ownership (26% or more voting rights), including holding, subsidiary, and associate companies.
A new Section 240C empowers the Central Government to prescribe rules for cross-border insolvency, including recognition of foreign proceedings, judicial cooperation, assistance and coordination. The expression “corporate debtor” for the purposes of this section includes any person incorporated with limited liability outside India.
Other Notable Changes
Section 3(31) now includes an explanation clarifying that a security interest exists only if it creates a right, title, or interest in property pursuant to an agreement or arrangement, and does not include a security interest created merely by operation of law. A new definition of “service provider” (Section 3(31A)) encompasses insolvency professionals, insolvency professional agencies, information utilities, registered valuers, and other notified persons.
Section 12A (withdrawal of CIRP) has been substituted. Withdrawal now requires 90% CoC voting share approval, on an application by the resolution professional. It cannot be made before the constitution of the CoC or after the first invitation for submission of a resolution plan.
Section 14 (moratorium) has been amended to add an explanation clarifying that the moratorium also applies where a surety seeks to initiate or continue proceedings against the corporate debtor pursuant to a contract of guarantee.
Section 59 (voluntary liquidation) now includes a mechanism for termination of voluntary liquidation proceedings by special resolution of members plus approval of creditors representing two-thirds in value of debt, within seven days.
Section 54A (pre-packaged insolvency) has been amended to reduce the approval threshold from 66% to 51%.
Section 240B provides for an electronic portal to be notified by the Central Government for facilitating insolvency and bankruptcy processes under the Code.