In a major step to fast-track insolvency proceedings, the Lok Sabha on Monday approved the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, aimed at reducing delays and strengthening India’s corporate resolution framework.

The Bill, introduced by Finance Minister Nirmala Sitharaman, mandates a strict 14-day timeline for admitting insolvency applications once a company’s default has been established—marking a significant reform to speed up stalled cases.

Sitharaman said the government has proposed 12 key amendments to the Insolvency and Bankruptcy Code to improve efficiency and address long-standing issues in the system. She highlighted that excessive litigation has been the primary reason behind delays in insolvency resolutions, and the new provisions include penalties to prevent misuse of the process.

The Bill, which was earlier referred to a Select Committee, was taken up for discussion in the Lok Sabha on March 27 before being passed. It seeks to streamline procedures for resolving cases involving financially stressed companies and individuals.

Defending the reforms, Sitharaman emphasised that the Insolvency and Bankruptcy Code, implemented in 2016, has played a crucial role in improving the health of India’s banking sector. She noted that the law has helped enforce better credit discipline and improved the overall credit profile of companies.

The Finance Minister clarified that the IBC is not meant to be a debt recovery mechanism but a structured framework for resolving financial stress and reviving viable businesses. “IBC is a framework for rescuing viable businesses and preserving enterprise value. It was never intended to be a debt recovery tool,” she said.

She also pointed out that companies emerging from insolvency proceedings have shown improved corporate governance and stronger financial performance, underlining the long-term benefits of the law.