Nirmala Sitharaman Introduces Insolvency And Bankruptcy Code (Amendment) Bill, 2025 In Lok Sabha What We Know

(MENAFN- Live Mint) Union Finance Minister Nirmala Sitharaman introduced a Bill in the the Lok Sabha on Tuesday, 12 August, that allows creditors to start an insolvency process outside a court for genuine business failures. The Bill aims to resolve such insolvency cases faster and in a cheaper way than it is done in the current system.

The Bill was introduced amid opposition protests over a separate matter concerning the Special Intensive Revision of electoral rolls in Bihar. Despite the uproar, the House approved Sitharaman's motion to refer the Bill to a Select Committee for further examination.

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At the heart of the proposed amendments lies the creation of a“creditor-initiated insolvency resolution process”. This would allow creditors to begin insolvency proceedings through an out-of-court initiation mechanism for genuine business failures.

By bypassing the need for immediate judicial intervention, the measure is expected to reduce delays, lower costs, and minimise disruptions to ongoing business operations. It also aims to ease the burden on overworked tribunals while improving access to credit and enhancing India's ease of doing business ranking.

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The Statement of Objects and Reasons accompanying the Bill emphasises its goal to“maximise value for all stakeholders” and improve governance under the Insolvency and Bankruptcy Code (IBC). The amendments seek to refine existing provisions, introduce new tools for resolution, and harmonise procedures with internationally recognised norms.

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Two major new frameworks are set to be introduced:

• Group Insolvency Framework – Designed to address complex corporate structures, this mechanism will enable coordinated resolution of multiple entities within the same group, preventing the value erosion that can occur when cases are handled separately.
• Cross-Border Insolvency Framework – This will establish a legal basis for recognising and coordinating insolvency proceedings that span multiple jurisdictions, protecting stakeholder interests in both domestic and foreign courts and bolstering investor confidence.

Why does this matter for India's business climate?

If implemented effectively, these reforms could mark a turning point for India's corporate resolution landscape. By streamlining processes, reducing litigation timelines, and adopting cross-border recognition standards, the Bill is poised to make insolvency proceedings more predictable and business-friendly.

Economists suggest that the reforms could encourage greater foreign investment by signalling that India is committed to protecting creditor rights while supporting distressed businesses in genuine need of revival.

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With the Bill now headed to the Select Committee, stakeholders from the financial sector, corporate community, and legal fraternity will be watching closely to see whether the final legislation preserves its intended balance between creditor empowerment and debtor protection.

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