**Government Proposes Key Changes to Bankruptcy Law for Faster Company Revivals**
In a significant move aimed at expediting the turnaround of insolvent companies, the Indian government has proposed a crucial amendment to the bankruptcy law. This change will allow revival plans for companies to proceed even if lenders are embroiled in disputes regarding the distribution of proceeds. According to sources familiar with the discussions, the amendment is part of the Insolvency and Bankruptcy Code (Amendments) Bill, 2025, which has been presented in Parliament.
The proposed legislation enables tribunals to approve a company’s resolution plan before addressing any disagreements among creditors about how to allocate the proceeds. This flexibility is expected to save valuable time in the revival process, which can otherwise be hindered by prolonged litigation. One source noted, “This flexibility saves valuable time in the revival of the company, which otherwise could be lost to years of litigation.”
The Insolvency and Bankruptcy Board of India (IBBI) will be responsible for establishing regulations that outline how the administrator of a bankrupt business can petition a tribunal for separate handling of the implementation of the debt resolution plan and the distribution of proceeds. These regulations will also specify the conditions under which the resolution professional can make such applications.
The tribunal’s order regarding the resolution plan, along with its subsequent decision on the distribution of proceeds among creditors, will be binding on all stakeholders, as per the proposed amendment to Section 31 of the IBC, which governs the approval of debt resolution schemes.
This amendment is particularly significant in light of past instances where inter-creditor disputes have delayed the implementation of debt resolution plans for companies like Essar Steel Ltd, Jaypee Infratech Ltd, and Reliance Infratel Ltd, which ultimately required Supreme Court intervention. Experts believe that this change will help mitigate delays caused by litigation, which has plagued many cases.
Official data indicates that the 1,258 companies that have successfully undergone the IBC process as of June 2025 took an average of 602 days to complete, excluding certain periods such as stays ordered by the courts. The proposed amendment is expected to be reviewed by a select committee and may be discussed during the upcoming winter session of Parliament.
Inter-creditor disputes often stall approvals at the National Company Law Tribunal (NCLT). By allowing the tribunal to prioritize the approval of revival plans, this amendment aims to eliminate a significant bottleneck, ensuring timely implementation of debt resolution strategies.
**FAQ**
**What is the significance of the proposed amendment to the bankruptcy law?**
The proposed amendment allows for quicker approval of company revival plans, even amidst disputes among creditors, thereby reducing delays in the insolvency process and facilitating faster resolutions.