IBC (Amendment) Bill, 2025: Key Recommendations of the Select Committee

– Neha Malu, Associate | resolution@vinodkothari.com

In a major overhaul of the IBC, 2016, the IBC (Amendment) Bill, 2025 proposed a set of far reaching changes, introducing several strategic initiatives aimed at addressing structural bottlenecks, strengthening creditor protection and improving the efficiency of the insolvency resolution framework [Read our detailed article on the Amendment Bill here]. The Bill was referred to a Select Committee of Parliament for review, which examined the proposed amendments in detail and made recommendations on several provisions. Below we discuss the key changes suggested by the Select Committee in its Report on the proposals in the Bill: 

1. Service providers to also include ‘registered valuers’ [Sec 3(27A), (31A), 217, 218 and 219]: In the definition of service provider, explicit inclusion of registered valuers is proposed. Accordingly, any person aggrieved by the functioning of service providers including registered valuers may file a complaint with the IBBI. In view of this change, provisions relating to inspection and investigation by IBBI will also apply in case of registered valuers. 
2. Enabling asset level resolution [Sec 5(26)]: To clarify the legislative intent of allowing sale of one or more assets for maximizing the value for a corporate debtor holding multifarious businesses, the following explanation to the definition of “resolution plan” is proposed: 

Explanation.— For the removal of doubts, it is hereby clarified that a resolution plan may include provisions for the restructuring of the corporate debtor, including by way of merger, amalgamation, demerger, and sale of one or more assets of the corporate debtor through one or more plans proposed by one or more resolution applicants subject to such conditions as may be specified.

3. Composition of implementation/monitoring committee [Section 30]: The Committee recommended that the guidance with respect to the composition of the implementation/monitoring committee should be provided in the Code.  Accordingly, for monitoring the implementation of resolution plan, the Committee to comprise such persons including the resolution professional or any other insolvency professional, and the representatives of a class or classes of creditors and the resolution applicant, and subject to such conditions and in such manner as may be specified. 

Here it may also be noted that presently, regulation 38(4)(b) of the CIRP Regulations provides that the monitoring committee may consist of the resolution professional or any other insolvency professional, or any other person, including representatives of the committee and representatives of resolution applicant(s), as its members.

4. Retrospective applicability of clean slate provisions [Section 31]: To clarify and acknowledge the concept of the clean-slate principle post approval of the resolution plan, the Amendment Bill proposed to add sub-section (5) and (6) in section 31. Accordingly, once a resolution plan is approved, claims are settled according to the plan, and unless otherwise specified, they are extinguished. Now, to clarify the declaratory nature of the provisions related to “clean slate principle” and to avoid litigation in relation to the matters already decided, the following explanation is recommended to be added in section 31.

“Explanation III – For the removal of doubts, sub-sections (5) and (6) are clarificatory in nature and codify the original legislative intent of the Act. 

Save as otherwise expressly provided or decided through judicial pronouncements, the provisions of this section shall apply from the date of the commencement of the Principal Act”

5. Resolution professional not to continue as liquidator [Section 34]: The Committee noted a “perverse incentive” for the RP to favour liquidation over resolution to secure additional fees, as the liquidator’s remuneration is often a percentage of the liquidation estate, unlike the RP’s fixed monthly salary. Accordingly, to eliminate the perception and possibility of a conflict of interest, the Committee proposed that the RP who has conducted the CIRP or PPIRP for corporate debtor shall be ineligible to be appointed as the liquidator.  
6. Timeline for disposal of cases by NCLAT [Section 61]: Presently, the provisions of IBC, 2016 does not prescribe any statutory timelines for the disposal of appeals by NCLAT. The Committee noted that this gap has resulted in delays, particularly in appeals challenging the rejection of claims during the CIRP or liquidation processes, as well as appeals concerning the approval or rejection of resolution plans. Accordingly, a statutory timeline of 3 months from the date of its receipt for disposal of appeal is proposed for NCLATs. 
7. Priority of government dues [Section 53]: Government dues shall be confined strictly to the fifth and sixth levels of priority in the waterfall mechanism. However, where the corporate debtor has collected or deducted taxes at source (TDS/TCS) but failed to deposit the same with the Central Government, such non-deposited amounts result in a direct loss of public revenue. The relevant provisions for treatment of such non-deposited amounts are proposed to be specified through appropriate regulations.
8. Reduced voting threshold for initiating PPIRP [Section 54A]: For initiation of PPIRP, approval of at least 51% of the unrelated financial creditors is required, aligning the threshold with that applicable to the newly proposed CIIRP. This represents a reduction from the earlier requirement of 66%. 
9. Decriminalisation of offences [Section 74 and 76]: Sections 74 and 76 are proposed to be omitted. Instead new sections 67B and 67C are proposed to be inserted with an intent to decriminalise the punishment for contravention of moratorium and resolution plan and punishment for non-disclosure of dispute or payment of debt by operational creditor. 
10. Power of IBBI to specify CoC’s code of conduct and timeline for decision making [Section 196(sa)]: In the powers of IBBI, clause (sa) is proposed to be modified to be read as: (sa) specify the standards of conduct for the Committee of Creditors and its members, including the period within which the Committee of Creditors shall take decisions, while acting under Part II and Part III of this Code, as the case may be. Effectively, this modification is intended to empower IBBI to specify (i) the code of conduct for CoC and (ii) the timeline within which the CoC is required to make decisions. 

In addition to the changes proposed in the Amendment Bill, the Select Committee emphasised the need for the formulation of detailed regulations to operationalise the amendments effectively. These regulations are expected to provide clarity on procedural aspects and address practical challenges that may arise during implementation.

Further, in the context of group insolvency and cross border insolvency, the Committee recommended the rules and regulations to be precisely drafted to cater for India’s unique institutional environment which includes factors like promoter-driven litigation, related-party influence, and the inherent complexity of cross-entity claims.

The Committee also highlighted the need for enhancing institutional capacity to address delays in proceedings. This includes increasing the number of benches and providing adequate financial resources for infrastructure improvements, thereby supporting more efficient resolution and adjudication under the Code.

Related resources: 

1. Youtube video on IBC Amendment Bill, 2025
2. Presentation on IBC Amendment Bill, 2025