SUMMARY OF  2026 AMENDMENT TO INSOLVENCY AND BANKRUPTCY CODE, 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 has introduced several significant changes to the insolvency framework. Some of the major changes are discussed below.

CURTAILING THE DISCRETION OF THE ADJUDICATING AUTHORITY

The discretion of the Adjudicating Authority to admit a petition under Section 7 has been significantly curtailed. Where a default has occurred, the application is complete, and no disciplinary proceedings are pending against the proposed Resolution Professional, the Adjudicating Authority is now required to admit the application.

The decision of the Supreme Court in Vidarbha Industries Power Limited v. Axis Bank Limited, (2022) 8 SCC 352, wherein the Court interpreted the word “may” in Section 7(5)(a) as conferring discretion upon the Adjudicating Authority to admit or reject an application even after default had been established, appears to have been legislatively overruled by the 2026 Amendment.

A fourteen-day timeline for deciding applications under Sections 7, 9, and 10 has also been made mandatory. Where an application is not admitted within fourteen days, reasons for such non-admission must be recorded in writing. However, considering the infrastructural challenges faced by the NCLT, including the shortage of courtrooms and Presiding Officers, adherence to this timeline may remain difficult in practice.

INCREASING THE ROLE OF THE COMMITTEE OF CREDITORS IN LIQUIDATION

The control of Financial Creditors has been strengthened even during liquidation. The Committee of Creditors has now been designated as the supervisory body overseeing the liquidation process. Consequently, the Stakeholders’ Consultation Committee, which was a more representative body comprising Operational Creditors and other stakeholders, has ceded its position to the Committee of Creditors.

CREDITOR-INITIATED INSOLVENCY RESOLUTION PROCESS

A new insolvency resolution mechanism, namely the Creditor-Initiated Insolvency Resolution Process (CIIRP), has been introduced for a specified class of Financial Creditors. Under this framework, insolvency proceedings may be initiated without approaching the NCLT at the threshold stage.

Financial Creditors holding at least fifty-one percent of the debt of a Corporate Debtor may commence CIIRP. There is no requirement to approach the NCLT at the initial stage. The Financial Creditors may themselves appoint a Resolution Professional, while the Corporate Debtor remains in possession of its assets and management during the process. The Resolution Professional is required to approach the NCLT for the declaration of a moratorium and for the final approval of the Resolution Plan.

GOVERNMENT NOT A SECURED CREDITOR

In State Tax Officer v. Rainbow Papers Limited, (2023) 9 SCC 545, the Supreme Court held that tax authorities could fall within the ambit of “secured creditors” on account of statutory charge provisions contained in tax statutes. Subsequent judgments did not fully endorse this view, and the 2026 Amendment has now settled the controversy.

A charge created merely by operation of law will no longer qualify as a “secured interest.” Only a security interest created by contract will be covered within the definition of “secured interest.” As a consequence, the Government can no longer claim priority in the waterfall mechanism over Financial Creditors on the basis of statutory charges.

ENABLING FRAMEWORK FOR CROSS-BORDER AND GROUP INSOLVENCY

The 2026 Amendment provides an enabling framework for cross-border insolvency and group insolvency. Detailed provisions are to be introduced by the Government through subordinate legislation and rules.

CLEAN SLATE PRINCIPLE CODIFIED

The Supreme Court, in Ghanshyam Mishra and subsequent decisions, held that upon approval of a Resolution Plan, all claims that do not form part of the approved Resolution Plan stand extinguished. This principle, commonly known as the “clean slate” principle, has now been expressly codified through the 2026 Amendment.

EXPANSION OF THE CIRP ASSET POOL

Where a creditor is in possession of assets belonging to a guarantor of the Corporate Debtor, such assets may now form part of the CIRP asset pool, subject to the approval of the Committee of Creditors.

TIMELINE FOR LIQUIDATION

Liquidation proceedings are now required to be completed within 180 days, extendable by a further period of 90 days in appropriate cases.

RATIONALISATION OF THE LOOK-BACK PERIOD

The look-back period has been rationalised. It will now be computed from the date of filing of the insolvency application rather than from the date of the CIRP admission order.

OMMISSION OF FTCIRP

Provisions of Fast Track Insolvency Resolution Process has been omitted.

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