The Insolvency and Bankruptcy Code and the Amendment Act of 2026: A Practitioner's Reference

The Insolvency and Bankruptcy Code, 2016 consolidated India's fragmented insolvency laws into a single, time-bound framework administered by the National Company Law Tribunal as Adjudicating Authority, with the Insolvency and Bankruptcy Board of India as regulator. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026), which received Presidential assent on 6 April 2026, is the most substantial revision of that framework since enactment. It imposes binding timelines on the Adjudicating Authority at every stage of the process, restores mandatory admission under Section 7, codifies several settled lines of judicial authority, restructures liquidation, substitutes civil penalties for certain criminal provisions, and creates statutory foundations for three frameworks new to Indian insolvency law: a creditor-initiated resolution process, group insolvency, and cross-border insolvency.

I. What the Code was built to do

Before 2016, an insolvent Indian company could be pursued under the Sick Industrial Companies Act, the Companies Act winding-up provisions, the SARFAESI Act and the Recovery of Debts Act simultaneously, before different forums applying different tests. There was no single proceeding in which the question "can this business be saved, and if not, how should its value be distributed?" was answered once.

The Code answered that question with a specific architecture, and the architecture explains almost everything that follows from it:

Default, not sickness, is the trigger. The Code does not ask whether a company is beyond rescue. It asks whether a debt is due and unpaid. That single design decision is what makes the process fast, and it is also what generates most of the litigation at the admission stage.

Control shifts on admission. The board is displaced, an insolvency professional takes over management, and a moratorium under Section 14 suspends enforcement against the corporate debtor. This is the creditor-in-control model, and it is a deliberate reversal of the debtor-in-possession position that preceded it.

Commercial decisions belong to creditors, not to the Tribunal. The committee of creditors decides whether to accept a resolution plan. The Adjudicating Authority satisfies itself that the plan conforms to Section 30(2); it does not substitute its own commercial judgment. This principle — the commercial wisdom of the committee — has been repeatedly affirmed and is the axis on which the entire process turns.

Resolution is preferred to liquidation. Liquidation is what happens when resolution fails, not a parallel option.

The process is time-bound. Statutory outer limits apply to the resolution process, and the amendment now extends that discipline to the Adjudicating Authority itself.

Whether the Code has delivered on this design is a question the regulator publishes data on rather than a matter of opinion. According to the Insolvency and Bankruptcy Board of India's quarterly newsletter, of corporate insolvency resolution processes yielding resolution plans as at 31 December 2025, realisation by creditors stood at approximately 31.63% of admitted claims — but at approximately 94.95% of the fair value of the assets actually available. The gap between those two figures is the single most misunderstood statistic in Indian insolvency. It does not show that creditors lose two-thirds of their money in the process. It shows that by the time most corporate debtors reach the Tribunal, the value has already gone — and that the Code is recovering close to everything that remains.

That is the practical context in which the 2026 amendment should be read. The delay that destroys value largely occurs before and during admission. The amendment is, in substance, an attack on that delay.

II. The admission gateway: discretion removed

The most consequential change is the substitution of Section 7(5).

The Adjudicating Authority must now determine an application by a financial creditor within fourteen days of receipt. Where it proposes to reject for a defect, it must first give the applicant notice to rectify within seven days. Where it does not decide within fourteen days, it must record its reasons for the delay in writing.

The decisive language is the new Explanation I: where the requirements of clause (a) are satisfied — a default has occurred, the application is complete, and no disciplinary proceeding is pending against the proposed resolution professional — no other ground shall be considered to reject an application.

This is a legislative answer to a question that had divided practice. Following Innoventive Industries Ltd. v. ICICI Bank, admission was understood as mandatory once debt and default were established. Vidarbha Industries Power Ltd. v. Axis Bank Ltd. was subsequently read as introducing a discretion permitting the Tribunal to decline admission on wider considerations. The amendment removes that discretion in terms.

Explanation II adds an evidentiary shortcut: where a financial institution files a record of default recorded with an information utility, that record is sufficient for the Adjudicating Authority to ascertain default. For a bank with disciplined information utility filing practice, this materially shortens the evidentiary contest at admission.

A corresponding discipline now applies to operational creditors. Section 215(3) provides that an operational creditor shall, before filing under Section 9, submit financial information to an information utility — replacing the earlier permissive language. Read with the new Section 67C, which permits a penalty of between one lakh and two crore rupees where an operational creditor conceals a notified dispute, the threshold for opportunistic Section 9 filings rises appreciably.

III. Timelines, and the duty to explain delay

The amendment inserts a consistent architecture of outer limits, each accompanied by an obligation to record reasons in writing where the period is exceeded:

The obligation to record reasons is the operative element rather than the period itself. It converts delay from an administrative reality into something appearing on the face of the record — and therefore into material available on appeal.

IV. Settled law, now legislated

Three contested areas have been resolved by statute rather than left to further litigation.

Security interest and government dues. A new Explanation to Section 3(31) confines "security interest" to a right created pursuant to an agreement or arrangement, by the act of two or more parties, expressly excluding an interest arising merely by operation of law. This displaces the wider reading in State Tax Officer (1) v. Rainbow Papers Ltd., under which a statutory first charge could claim secured status. A further Explanation to Section 53(1)(e)(i) confines government dues within that tier to the two years preceding the liquidation commencement date, with any balance ranking under clause (f).

For secured lenders this restores the priority position that the Code was designed to protect, and it is the amendment's most significant change for banks and asset reconstruction companies.

The clean-slate principle. New Section 31(6) provides that on approval of a resolution plan, claims against the corporate debtor arising before the date of approval are extinguished unless the plan provides otherwise, and that no proceedings — including proceedings for assessment of claims — may be continued or instituted on the basis of such claims. New Section 31(5) protects licences, permits, registrations, quotas and concessions from suspension or termination during their remaining period, provided the obligations attaching to them are met. Explanation III extends these provisions to plans approved from the commencement of the Code, save for matters that have attained finality. Explanation I preserves claims against promoters, persons in management or control, guarantors and those jointly liable.

The practical effect is to protect the successful resolution applicant from the revenue and regulatory claims that had frequently emerged after plan approval, which had become a material deterrent to bidding.

Avoidance applications. The substituted Section 26 provides that filing an avoidance or fraudulent trading application does not affect the resolution or liquidation process, and that completion of that process does not affect the continuation of the avoidance proceedings. Section 47 permits a creditor, member or partner to apply where the professional has failed to report a preferential, undervalued or extortionate transaction or fraudulent trading, and requires the Adjudicating Authority to direct disciplinary proceedings against a professional who failed to report despite having the information.

The look-back periods under Sections 43, 46 and 50 have been recalculated to run from the initiation date to the insolvency commencement date, rather than backwards from commencement alone. Where admission was delayed, transactions previously falling outside the window may now be examinable — a change of real practical consequence in matters where admission took years.

V. Liquidation restructured

The committee of creditors no longer dissolves when liquidation commences. Under new Section 21(11) it continues and supervises the liquidator's conduct, and under new Section 34A it may, by 66% of voting share, resolve to replace the liquidator. Section 34(4) prohibits the resolution professional from being appointed liquidator of the same corporate debtor, and Section 34(1) requires the Adjudicating Authority to seek the Board's recommendation before appointment.

Section 33(1A) introduces a genuine alternative to liquidation. Before passing a liquidation order, the Adjudicating Authority must consider an application by the committee of creditors, made by 66% of voting share, to restore the corporate insolvency resolution process — for a period not exceeding 120 days, available once only. This applies to processes commenced before the amendment where no liquidation order has been passed.

Section 52(2) requires a secured creditor intending to realise security outside the liquidation estate to inform the liquidator within fourteen days of the liquidation commencement date, failing which the security interest is deemed relinquished. Where multiple secured creditors hold security over the same asset, realisation requires the agreement of creditors representing 66% in value. This is a trap for the inattentive lender, and it is the provision most likely to cause avoidable loss in the first years of operation.

VI. Deterrence recalibrated

Sections 74 and 76 have been omitted, and the emphasis moves from prosecution to monetary penalty. Section 64A permits a penalty of between one lakh and two crore rupees on a person initiating frivolous or vexatious proceedings under Part II, with Section 183A providing the equivalent under Part III. Section 67B penalises contravention of the moratorium and of an approved resolution plan. The substituted Section 235A empowers the Adjudicating Authority to impose a penalty of not less than one lakh rupees for each day of continuing contravention, extending to three times the loss caused or the unlawful gain made, subject to a ceiling of five crore rupees where loss or gain is not quantifiable.

VII. Three new frameworks, and how they commence

The amendment creates statutory foundations for three frameworks that did not previously exist in Indian insolvency law. Each is inserted into the Code by the Amendment Act; each commences on such date as the Central Government appoints under Section 1(2) of the Amendment Act, which expressly permits different dates for different provisions. Practitioners should verify the commencement position applicable to any given provision at the time of advising.

Creditor-initiated insolvency resolution process (Chapter IV-A, Sections 58A–58K). An out-of-court process initiated by a financial creditor belonging to a notified class of financial institutions, in respect of notified categories of corporate debtor. Initiation requires approval of financial creditors representing not less than 51% in value. The corporate debtor remains in management, subject to the resolution professional's power to reject resolutions passed at board or member meetings. The process runs for 150 days, extendable once by 45 days. A moratorium is not automatic — the resolution professional applies for it, and the Adjudicating Authority confirms or rejects. The process converts to a conventional resolution process where no plan is approved, where the debtor fails to cooperate, or where the committee of creditors so resolves by 66%.

This is the most significant structural addition. It moves the centre of gravity of a class of insolvencies out of the Tribunal entirely, with the Tribunal retaining a supervisory and conversion role.

Group insolvency (Chapter VA, Section 59A). A rule-making power enabling the Central Government to prescribe the manner and conditions for conducting proceedings where two or more corporate debtors forming part of a group are subject to insolvency. The provision contemplates a common Bench, coordination between committees of creditors and professionals, appointment of a common insolvency professional, and binding coordination agreements. "Group" is defined by control or significant ownership, with significant ownership set at 26% or more voting rights. Draft rules must be laid before both Houses of Parliament.

Cross-border insolvency (Section 240C). A rule-making power enabling the Central Government to prescribe the manner and conditions for administering cross-border insolvency proceedings, including recognition of foreign proceedings, granting of relief, judicial cooperation, assistance and coordination, for notified classes of debtor and notified countries or territories. The Explanation extends "corporate debtor" to include a person incorporated with limited liability outside India, and the section permits designation of specific Benches. Draft rules are subject to the same parliamentary laying requirement.

Section 240B separately empowers the Central Government to provide an electronic portal on which insolvency processes are to be conducted.

VIII. The cross-border dimension, and why it reaches beyond insolvency

The cross-border provision deserves more attention than it usually receives, because its consequences extend past the insolvency bar.

India's existing provisions on cross-border cooperation — Sections 234 and 235 of the Code, resting on bilateral agreements and letters of request — have seen little practical use. Section 240C creates the architecture for a recognition-based framework of the kind contemplated by the UNCITRAL Model Law on Cross-Border Insolvency, under which a foreign proceeding may be recognised and relief granted without a bilateral treaty.

For a firm's practice this changes the character of the work. A recognition application requires evidence of the foreign proceeding, of the debtor's centre of main interests, of the foreign representative's authority, and of the relief sought and its equivalence in Indian law. That is document-intensive work conducted to foreign timelines, frequently in parallel with proceedings in another jurisdiction and in coordination with foreign counsel.

It is work of exactly the character our firm already performs through its international legal support practice — structured research, document review, evidence preparation and drafting support delivered to law firms and in-house teams in the United States, the United Kingdom, Canada, Australia and elsewhere, under the supervision of the instructing attorney. As and when the cross-border framework is brought into operation, the two capabilities meet: Indian insolvency counsel able to appear before the Adjudicating Authority, supported by a team already accustomed to working to the evidentiary standards and timelines of foreign proceedings.

IX. What we would tell a client

Some practical observations, offered as our view rather than as advice on any particular matter.

For a lender, the value is now in preparation, not in argument. With admission converted into a documentary test, the contest moves earlier. An application supported by a properly recorded information utility default, complete on its face, with no disciplinary issue affecting the proposed professional, should be admitted. One that is not will be met with a rectification notice and lost weeks. The work that decides the outcome is now done before filing.

Diarise the fourteen-day security intimation. Section 52(2) will catch lenders who assume security can be dealt with as the liquidation progresses. Deemed relinquishment is not a technicality; it changes the recovery position entirely.

Review pending avoidance applications against the amended look-back. Where admission was slow, transactions previously outside the window may now fall within it. This is worth an audit of live matters rather than a case-by-case discovery.

Consider restoration before conceding liquidation. Section 33(1A) gives a committee of creditors a route back to resolution that did not previously exist. It requires 66% and a case for why 120 days will produce what the earlier period did not — but where a bidder emerged late, that case can often be made.

Guarantors are not protected by the corporate debtor's resolution. The Explanation to Section 14(3)(b) and Explanation I to Section 31(6) both make this plain. A plan that resolves the principal debt does not extinguish the guarantee.

X. Technology in insolvency practice

Insolvency work is document-heavy in a way that few other practices are. A single corporate insolvency matter can involve years of statements of account, security documentation, board minutes, related-party transaction records and claim submissions from dozens or hundreds of creditors — much of it arriving as scanned paper of variable quality.

Our approach to this is deliberate and bounded. We apply optical character recognition to scanned records so that loan files, statements of account and security documents become searchable and indexed. We use assistive tools for extraction, chronology assembly from dated material, deduplication across large document sets, and first-pass identification of relevant passages in voluminous records. These are retrieval and organisation functions, and their value is in reducing two specific failure modes: the figure transcribed incorrectly from a poor scan, and the document that exists in the file but is never found because nobody could search for it.

We do not use these tools to generate legal conclusions, and nothing derived from them reaches a client, a counterparty or a tribunal without verification against an authoritative source by a qualified lawyer. Every authority is confirmed in an authorised database before filing. The Supreme Court of India has held that citing unverified, machine-generated precedent is misconduct on the part of an advocate — a position we regard as correct and which reflects the practice we already followed. Section 240B's contemplation of an electronic portal for insolvency processes suggests the direction of travel is toward more digital process, not less, which makes the discipline around verification more important rather than less.

XI. Insolvency practice at Sagar & Sagar Law Offices

Sagar & Sagar Law Offices has conducted insolvency work before the National Company Law Tribunal and the National Company Law Appellate Tribunal since the Code came into force, acting for financial creditors, operational creditors, corporate debtors, resolution applicants, committees of creditors and personal guarantors.

The practice is led by Advocate Rajeev Sagar, the firm's founding and managing partner, who has appeared in insolvency matters since the Code's commencement and who leads the firm's connected banking, recovery and insolvency work. The firm's other founding partner, Sanjeev Sagar, was designated a Senior Advocate by the High Court of Delhi in November 2024, and is available as senior counsel in the firm's complex and appellate insolvency matters. The firm is institutionally empanelled with several of India's major public sector and private sector banks, housing finance companies, non-banking financial companies and financial institutions.

The insolvency practice covers:

• Corporate insolvency resolution process (CIRP) — conduct of proceedings from initiation through to approval of a resolution plan
• Financial creditor representation (Section 7) — applications, proof of default, and information utility records
• Operational creditor representation (Sections 8 and 9) — demand notices, applications, and the pre-existing dispute defence
• Corporate debtor and corporate applicant representation (Section 10) — including defence of admission applications
• Committee of creditors advisory — voting, commercial decisions, record-keeping, and the standards of conduct specified by the Board
• Resolution plans and Section 29A eligibility — assessment, objections, and approval proceedings
• Liquidation and distribution — including the committee's supervisory role and priority under Section 53
• Avoidance and preferential transaction applications — under Sections 43, 45, 49, 50 and 66, and applications under Section 47
• Personal guarantor insolvency — proceedings under Part III as applicable to guarantors of corporate debtors
• Pre-packaged insolvency for eligible MSMEs — under Chapter III-A, including the amended approval threshold
• Creditor-initiated and group insolvency — advisory on the frameworks as and when brought into operation
• Cross-border insolvency — advisory as and when the framework under Section 240C is brought into operation
• Insolvency litigation and appeals — before the NCLAT under Section 61 and the Supreme Court under Section 62

Because the firm conducts banking enforcement, debt recovery and insolvency together, matters that move between SARFAESI enforcement, proceedings before the Debts Recovery Tribunal and proceedings before the National Company Law Tribunal are handled without a change of counsel and without loss of continuity in the secured creditor's position. The firm operates from New Delhi with a chamber at the Delhi High Court, and through offices and associated counsel in Mumbai and other principal commercial centres, enabling matters with exposure across states to be conducted without fragmentation of oversight.

This post is general commentary on legislation and does not constitute legal advice, nor does it create an advocate–client relationship. Provisions of the Insolvency and Bankruptcy Code, 2016 and of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 commence as notified by the Central Government, and rules and regulations made under them are subject to change; the position in force should be verified before it is relied upon. For enquiries relating to insolvency matters, see Insolvency & Bankruptcy (IBC), the firm's wider practice areas, or the Contact page.