Lok Sabha Passes Bill to Expedite Insolvency Proceedings

The Lok Sabha has approved the Insolvency and Bankruptcy Code (Amendment) Bill, which introduces a mandatory 14-day timeline for insolvency applications. Finance Minister Nirmala Sitharaman highlighted the need for these amendments to address delays caused by litigation and emphasized that the IBC is designed to improve the health of the banking sector, not merely to serve as a debt recovery tool. The Bill aims to enhance the resolution process for companies facing financial distress, ensuring better credit discipline and corporate governance practices.

By Narendra Chaudhary Mar 30, 2026, 14:26 IST

Lok Sabha Approves Insolvency and Bankruptcy Code Amendment

New Delhi, March 30: On Monday, the Lok Sabha gave its nod to the Insolvency and Bankruptcy Code (Amendment) Bill, which aims to accelerate the insolvency process for companies that default on payments.

This legislation mandates a strict 14-day period for the acceptance of insolvency applications once a company's default is confirmed.

Finance Minister Nirmala Sitharaman stated that the government has proposed 12 amendments to enhance the insolvency resolution framework.

She pointed out that prolonged litigation is a significant cause of delays in the IBC process, and the new Bill includes penalties to deter misuse of the system.

The discussion on the Bill, introduced by Finance Minister Sitharaman, began on March 27. Initially sent to a Select Committee, the Bill seeks to tackle the slow resolution of insolvency and bankruptcy cases for both companies and individuals.

During her address in the Lok Sabha, Sitharaman emphasized that the IBC has been instrumental in bolstering the banking sector's stability, clarifying that it was not designed solely as a debt recovery mechanism.

While presenting the Bill, she noted that the IBC has fostered improved credit discipline and enhanced the credit profiles of businesses.

According to the minister, companies have shown significant improvement in their governance practices after navigating the insolvency resolution process.

In her remarks regarding the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, as reviewed by the Select Committee, Sitharaman stated, “The IBC, effective since 2016, has been pivotal in enhancing the overall health of the Indian banking sector,” adding that it has also facilitated better credit ratings for companies over time.

She reiterated that the law's primary goal is to resolve distressed assets rather than just recover debts. “The IBC serves as a framework for salvaging viable businesses and addressing financial distress while maintaining enterprise value. It was never meant to be a tool for debt recovery,” she clarified.