The Story

Before 2016, India’s insolvency system was a bit of a nightmare. There were multiple laws dealing with bankruptcy. For companies, there was SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest), which allowed banks to seize assets without court involvement, or the Companies Act and the Sick Industrial Companies Act (SICA), which dealt with corporate insolvency.

But the problem was that firstly, these laws were all over the place and often misused to delay repayments. There were no strict timelines, and recoveries were low. Secondly, they didn’t solve the broader problem of resolving stressed companies.

What Led to the Amendment?

When the Insolvency and Bankruptcy Code, 2016 (IBC) was introduced, it marked a decisive shift in India’s credit framework. Control moved from debtors to creditors, timelines were formalized, and resolution replaced indefinite restructuring. Over time, however, the system began to show strain.

Admissions were delayed. Resolution timelines stretched well beyond prescribed limits. Litigation around avoidance transactions became routine rather than exceptional. In several large cases, value erosion during the process itself became a concern.

Data over the past decade indicates that the average time for resolution has ranged between 400 to 600 days, with several large cases extending well beyond 700 days. Delays in admission alone, despite a prescribed 14-day limit, often stretched into months. What was conceived as a time-bound process gradually became time-elastic.

By 2026, the issue was no longer about intent. It was about execution.

The amendment that followed was therefore not a reinvention of the Code. It was an attempt to restore discipline, reduce discretion, and bring predictability back into the system.

 

Corporate Insolvency Resolution Process – A Tighter Framework

The Corporate Insolvency Resolution Process (CIRP) continues to remain central to the Code, but its operating environment has changed.

Earlier, the framework allowed a degree of flexibility. Extensions were common, and tribunals often exercised discretion in admission and process oversight. While this helped in complex cases, it also contributed to delays.

Under the earlier regime, the 180 + 90 day framework often became a starting point rather than a boundary. Even after the introduction of the 330-day cap, extensions continued through litigation, effectively pushing timelines beyond intended limits.

The 2026 amendment attempts to correct this in two ways:

First, by reinforcing the 14-day admission timeline, with reduced scope for interpretational delays once default is established through information utilities. Admission is positioned as a procedural step, not a deliberative one.

Second, by tightening oversight within the process itself. The expectation is that the 330-day outer limit will function as a hard stop rather than a flexible ceiling, with fewer opportunities for repeated extensions.

Further, the new Code makes it clear that if multiple applications are filed against a company, the start date will be the one filed first, not whichever one is ultimately admitted or convenient to rely on later.

This removes the ambiguity relating to multiple Corporate Insolvency Resolution Process (CIRP) applications against the same company.

This alters the nature of CIRP in practice. It is no longer a process that adapts to delays. It is one that seeks to prevent them.

 

Look-Back Period – Redefining the Reference Point

One of the more technical, yet important, changes lies in how avoidance transactions are evaluated.

Under the earlier framework, the look-back period was calculated from the date of admission into insolvency. This created a gap. Delays in admission effectively reduced the window available to examine past transactions.

The amendment addresses this by shifting the reference point to the date of initiation.

The implication is straightforward. Transactions undertaken in the period leading up to default are now subject to greater scrutiny, regardless of procedural delays. This closes a timing loophole that had, in several cases, weakened recovery prospects.

 

Creditor-Initiated Insolvency Resolution Process – A Parallel Mechanism

The introduction of the Creditor-Initiated Insolvency Resolution Process (CIIRP) marks the most substantive departure from the earlier framework.

Unlike CIRP, which begins through tribunal admission, CIIRP allows financial creditors to initiate the resolution process outside the court system. The debtor continues to manage operations, but under creditor supervision. The process is time-bound, with a defined window for completion, and can transition into CIRP if required.

At a structural level, CIIRP blends elements of pre-packaged insolvency with the creditor control embedded in the Code. It is designed to address one specific issue that CIRP has struggled with—time.

 

CIRP and CIIRP – A Functional Contrast

CIRP remains a court-driven process with formal oversight at every stage. Control shifts to the resolution professional, and the Committee of Creditors drives key decisions within a regulated framework.

CIIRP, in contrast, begins outside the tribunal. Creditors initiate, negotiate, and supervise, while the debtor remains operationally involved. Judicial intervention is limited at the outset and becomes relevant only if the process moves toward formal insolvency.

The distinction is not merely procedural. It reflects a broader shift from structured resolution to negotiated resolution, from institutional control to creditor-led decision-making.

Taken together, the changes point to a clear direction- the Code is moving away from flexibility toward enforcement.

From procedural balance toward creditor primacy.

From court-led processes toward hybrid mechanisms.

This is not accidental. It reflects a view that delays, more than design, were the primary constraint in the earlier regime.

 

Relief Through Speed – The Case for CIIRP

There is a strong argument in favour of the new mechanism.

In several large insolvency cases under the earlier regime, value erosion was closely linked to time. Delayed resolutions led to operational decline, loss of market position, and reduced investor interest. Even where resolution was ultimately achieved, the recoveries were often lower than initially expected.

A process like CIIRP, if executed with discipline, addresses this directly. Early creditor alignment can accelerate decision-making. Continued involvement of management can preserve operational continuity. Reduced reliance on litigation can contain delays.

In sectors where asset value is sensitive to time, this could materially improve outcomes.

 

Concentration of Control – The Emerging Risk

The same features that make CIIRP efficient also introduce a new set of concerns.

The ability of creditors to initiate the process without immediate judicial oversight changes the balance within the system. While debtor control is formally retained, it exists within a framework shaped by creditor decisions. The scope for negotiation narrows when initiation itself is creditor-driven.

This raises a structural question. Efficiency, in this context, is being achieved through concentration of control.

There is a possibility that viable businesses may be pushed into resolution earlier than necessary. There is also the risk that minority stakeholders may find themselves with limited influence in outcomes that materially affect them.

The framework assumes that creditor decisions will align with value maximization. In most cases, that assumption holds. But not in all.

 

A Measured View

The 2026 amendment represents a calibrated but clear shift in approach.

CIRP, in its original form, sought to balance interests within a structured process.

CIIRP seeks to compress that process by relying more heavily on creditor judgment.

If implemented carefully, this can improve recovery rates, reduce delays, and strengthen credit discipline. It can also make the insolvency framework more responsive to business realities, where time often determines value.

At the same time, the success of CIIRP will depend on how that increased discretion is exercised. The framework leaves less room for delay, but also less room for correction once decisions are set in motion.

 

Conclusion

The amendment does not change the objective of the Code. It refines the means.

CIRP brought structure to insolvency resolution.

CIIRP introduces speed.

The question is not whether speed is necessary. It is whether it can be applied without compromising balance. In that sense, the reform is neither purely enabling nor inherently risky. Its outcome will depend on practice.

What sustained businesses during the crisis was access to timely support.

What will sustain them now is the quality of decisions taken under that support.