Insolvency and Bankruptcy Code (Amendment)Act, 2026

Introduction:

The IBC Amendment Act, 2026 marks a transformative leap forward in India’s insolvency regime with much emphasis on fortifying efficiencies and enhancing predictability. Key reforms range from swift judicial supervision upon established defaults and recalibrating the approach to prioritise resolution over liquidation at all times.
 

A brief timeline:

IBC Amendment Act 2026 to take effect from:

As per Clause 1(2) of the IBC Amendment Act 2026, the provisions will come into force on a date as may be appointed by the Central Government, by notification in the Official Gazette. Different dates may be appointed as the effective date for different provisions of the IBC Amendment Act 2026. Currently, these provisions are not operative. This Update is based on the provisions made available as on date.  

1. ‘Security Interest’ only when emanating from Contract [Clause 2]

The IBC Amendment Act 2026 inserts an explanation to Section 3(31) of the Code to clarify that a “security interest” shall be recognised only where it creates a right, title, interest, or claim over property pursuant to an agreement or arrangement inter se parties, and not one created solely by operation of law. 

LKS Comments:

This amendment clarifies that only contractual liabilities will vest a security interest. Impliedly, any statutory liabilities will not vest a ‘security interest’ unto the authorities administering the statute. With this amendment, the conundrum over whether the Government would hold first charge over the assets of a Corporate Debtor is laid to rest, effectively nullifying the judgement of Hon’ble Apex Court in State Tax Officer v. Rainbow Papers Ltd. [1]. 
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

2. Stringent timelines for admission or rejection of applications for initiating Corporate Insolvency Resolution Process (‘CIRP’) [Clause 4]

The IBC Amendment Act 2026 will make it mandatory for the adjudicating authority, (i.e., the Hon’ble NCLT) to admit or reject the application for initiating CIRP within 14 days of receipt of an application under Section 7. In Addition, the Hon’ble NCLT is required to record reasons for not passing orders within 14 days of receipt of the application. 

LKS Comments:

The timeline of 14 days provided under Section 7(5) of the Code was routinely interpreted to be directory, as per the dicta in Axis Bank Limited v. Vidarbha Industries Power Limited[2]. While the Hon’ble NCLT would exercise discretion to keep an application under Section 7 pending if the Hon’ble Tribunal felt it would enable the Corporate Debtor to stay outside the throes of insolvency, this often led to well-intentioned bottlenecks.

The mandatory timeline is therefore expected to plug procedural delays while also lending to enhanced accountability, inasmuch as the Hon’ble NCLT must now record reasons for not issuing Orders within the time-period. This permeates the entire IBC Amendment Act, with similar mandates for time-bound completion of CIRP engrafted into Section 9 and Section 10 of the Code under Clauses 5 and 6 of the IBC Amendment Act.
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

3. Window for withdrawal of application for initiating CIRP [Clause 8]

The IBC Amendment Act 2026 has introduced an embargo to the withdrawal of applications filed for initiating CIRP against a person. While retaining the current requirement that an application for withdrawal should be approved by 90% of the Committee of Creditors (‘COC’), the IBC Amendment Act 2026 stipulates that an application for withdrawal of CIRP, once admitted, shall not be withdrawn
 

• before the constitution of the COC and 
• after first invitation for submission of a resolution plan has been issued.
   

LKS Comments:

The window for limiting withdrawal of an application filed for initiating CIRP is on account of dual practical considerations. For one, late-stage withdrawals (after submissions of Resolution plans) would potentially disrupt the asset-values. For another, it thwarts the on-ground tendency to treat CIRP as a coercive tactic for debt-recovery, which has been deprecated by Courts[3].
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

4. COC to continue supervision of liquidation process [Clause 13]

The IBC Amendment Act 2026 inserts Section 21(10) which vests the COC with supervisory powers for the conduct of liquidation process, by the liquidator.

LKS Comments:

It ushers in a change to the current system, which currently contemplates that the Liquidator would confer with a “Stakeholder consultation committee” on key decisions. However, any suggestion put forth by the Stakeholder Consultation committee is not binding on the liquidator. Now, the COC will supervise the Liquidation proceedings.
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

5. Separation of CIRP proceedings from ancillary proceedings [Clause 16, 28]

The IBC Amendment Act, 2026 expands the scope of Section 26 of the Code. The Code currently provides that any application for avoidance of undervalued transactions would not affect the CIRP Proceedings. With the IBC Amendment Act 2026, applications for fraudulent transactions or wrongful trading are enfolded within Section 26, and any applications for these proceedings would not affect CIRP proceedings.

The IBC Amendment Act also inserts an explanation to clarify that the conclusion of CIRP or liquidation proceedings would not affect the continuation of any proceedings initiated in respect of avoidance transactions.

Corresponding amendments will also be caused to Section 47 of the Code, by Clause 28 of the IBC Amendment Act 2026. Section 47 of the Code now includes applications for preferential transaction and fraudulent or wrongful trading within its scope.

LKS Comments:

In effect, the CIRP of a Corporate Debtor is entirely decoupled from proceedings against a perpetrator of undervalued transactions or fraudulent or wrongful trading. The IBC Amendment Act 2026 has struck a balance between resolving insolvency of the Corporate Debtor while also ensuring that the perpetrators of avoidable transactions do not use a successful resolution plan as a shield. 
 

• The above amendments are not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

6. Transfer of assets of a Guarantor of a Corporate Debtor as part of CIRP [Clause 17]

The IBC Amendment Act, 2026 introduces Section 28-A, to enable a creditor to transfer the asset(s) of a guarantor of the Corporate debtor as part of the CIRP, with the approval of the COC. Any Creditor who intends to transfer the asset must have taken possession of asset and should have enforced their security interest.

Where the guarantor is undergoing insolvency resolution, liquidation or bankruptcy under the Code, the COC of the Guarantor must accord additional approval (by a vote of not less than sixty-six per cent. of the voting share). The IBBI is expected to issue regulations to specify the process for transferring the guarantor’s assets and to also delineate conditions on the types of assets that can be transferred, the persons who are eligible to purchase these assets, and the valuation mechanism in the case of a cumulative transfer.

LKS Comments:

This amendment emphasizes the intent to arrest asset fragmentation and consolidate the estate of the Corporate debtor. With this amendment in place, the IBC Amendment Act 2026 also empowers the IBBI to issue regulations for ensuring a balance between creditor flexibility and regulated asset transfers.
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

7. Payments to dissenting creditors on the basis of ‘lower-of’ [Clause 18]

Currently Section 30(2)(b) of the Code provides that a financial creditor who vetoes a resolution plan would be entitled to payment which would not be less than the value ennuring to such dissenting financial creditor in the event of liquidation. The IBC Amendment Act, 2026 inserts Section 30(2)(ba) to stipulate that a dissenting financial creditor will be entitled to the lower of the value arrived under the Resolution Plan or the value which would have been paid out in the event of liquidation.

LKS Comments:

The amendment tries to circumvent strategised dissent by financial creditors, who may prompt to force the Corporate debtor into liquidation even in the face of a viable resolution plan. The proposal to provide for a ‘lower of’ value fortifies the principle that the Code is focussed on devising a resolution of debts and that the collective wisdom of the COC would not be undermined by dissent by a lone financial creditor. 
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

8. Time-bound approval and implementation of Resolution plan [Clause 19]

The IBC Amendment Act 2026 causes functional amendments to the Code, accentuating the ethos of the Code - time-bound resolution of debts. In the specific context of the resolution plan, the amendments under the IBC Amendment Act, 2026 are 
 

1. Proviso to Section 31(1): the Adjudicating Authority may first approve the Resolution Plan and subsequently approve the manner of distribution of assets within 30 days. Such phased-approvals can be ordered on an application made by the Resolution professional, along with approval of COC (66% of voting share).
2. Section 31(2A): the Adjudicating Authority must approve or reject the resolution plan within 30 days from receipt of the application from the Resolution Professional. If no order is passed within 30 days, Adjudicating authority to record reasons for delay in passing the order.
3. Section 31(5): Approvals due from the Competition Commission of India (‘CCI’) may be obtained after the COC approves the resolution plan, so long as the approval of CCI is obtained before the Adjudicating authority approves the resolution plan under Section 30(6). 
4. Section 31(6): reiterates that all claims against the Corporate debtor or its assets not covered by the resolution plan will be deemed to have extinguished on approval of the resolution plan, and that no proceedings shall be continued or instituted against the Corporate debtor or its assets in connection with such claims.
    

Sections 31(5) and 31(6) are deemed to apply to the resolution plans already approved on and from 28 May 2016 (the date of commencement of the Code) except for matters that have attained finality.

LKS Comments:

These amendments fortify the legislative intent to fostering a time-bound insolvency regime, and for upholding the ‘clean-slate’ doctrine. Acknowledging that the regime for insolvency may converge with other regulatory frameworks, the IBC Amendment Act creates a window for obtaining approvals from the CCI, prior to the Hon’ble NCLT extending approval to the resolution plan. The Hon’ble Apex Court has expounded on this very aspect in Independent Sugar Corpn. Ltd. v. Hindustan National Gas & Industries Ltd. (Resolution Professional)[4]. The Law of the Land (as on date) is that prior approval from the CCI is a mandatory precondition for the approval of resolution plan in cases where such approval is required.
 

• The above amendments are not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
• Sections 31(5) and 31(6) will be deemed to apply to the resolution plans already approved on and from 28 May 2016 (date of commencement of Code) once the provisions are brought into force.
   

9. One-time restoration of CIRP, as a prelude to liquidation [Clause 20]

The IBC Amendment Act 2026 inserts Section 33(1A) to provide for a reinstatement of CIRP, on a temporary basis. The Code currently contemplates that where a resolution plan is not received within the timelines for completion of CIRP, or if a resolution plan does not meet the requirements of the Code, the Hon’ble NCLT would order for liquidation of the Corporate Debtor in terms of Section 33 of the Code.

The IBC Amendment Act 2026 proposes to introduce a window where CIRP would be temporarily restored on an application made by the Resolution Professional, which should demonstrate the approval of 66% of voting share of the COC. This restoration of CIRP can be done only once, for a period not exceeding 120 days. If no resolution is arrived at despite the reinstatement of CIRP, the Corporate Debtor would be ordered into liquidation.

The provisions for restoration of CIRP shall also apply to CIRP of a Corporate debtor ongoing (even if initiated before the date of commencement of IBC Amendment Act 2026), where the Adjudicating authority has not passed a liquidation order. This benefit will not apply to those cases where a liquidation order has already been passed.

LKS Comments:

This amendment can be viewed as a final measure, a renewed lease of life to keep the Corporate debtor running. In the event no resolution is arrived at despite the restoration of CIRP, the liquidation of the Corporate Debtor would commence.
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
• Further once the above-mentioned amendment relating to a reinstatement of CIRP is brought into force it shall also apply to ongoing CIRP where liquidation order has not been passed.
   

10. Revamp of Liquidation process and appointment of Liquidator [Clause 20,21, 33]

The IBC Amendment Act has distilled the necessity for timelines into the liquidation process as well.
 

1. Section 33(2A) has been inserted to mandate that the Hon’ble NCLT must pass order of liquidation within 30 days from the date of receipt of an intimation or application for initiation of liquidation. 
2. Section 34(1) has been substituted to provide that once liquidation is ordered, the Hon’ble NCLT must refer the matter to the Board for recommendation of an insolvency professional to be appointed as liquidator. 
3. Section 34(4) has been substituted to prohibit a resolution professional who administered CIRP for a Corporate Debtor from being appointed as liquidator for that Corporate debtor. 
4. Section 34A has been newly inserted vide clause 22 of the IBC Amendment Act 2026 by which the COC is allowed to replace the liquidator by a 66% vote. 
5. Section 54 (1) has been substituted to require that the liquidation process be completed within 180 days, extensible by a further 90 days on sufficient reasons shown to the Adjudicating authority.
    

LKS Comments:

The introduction of time limits within the liquidation process is an attempt to ensure maximisation of value of the assets and thwart asset-depreciation. While Clause 21 of the IBC Amendment Bill, 2025 had recommended that the resolution professional be retained for the liquidation proceedings in the interest of preserving ‘institutional memory’, the IBC Amendment Act, 2026 has categorically prohibited the retention of the resolution professional for liquidation. 
 

• The above amendments are not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

11. Realisation of Security Interest by Secured Creditor [Clause 31]

The IBC Amendment Act substitutes Section 52(2) to mandate that a secured creditor must realise the security interest within 14 days from the liquidation commencement date. On failure to do so, the security interest shall be deemed to be relinquished to the liquidation estate.

In case where more than one secured creditor has interest over a property, the asset can be realised only if secured creditors representing not less than 66% of the value of all claims agree. The amended provision will not apply to the liquidation process initiated on and before the date of commencement of the IBC Amendment Act 2026.

LKS Comments:

The amendment regarding enforcement of security interest by secured creditor would ensure completion of liquidation process in a prompt and efficient manner without much delay caused by secured creditor on deciding as to whether or not to enforce their security interest.
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
• The above amendment will not apply to the liquidation proceedings initiated on and before the date of commencement of the IBC Amendment Act 2026.
   

12. Security asset not covering the entire debt value [Clause 32]

The IBC Amendment Act introduces an ‘Explanation’ to Section 53(1)(b)(ii) to provide that, when the value of the security interest is lesser than the total debt owed by the Corporate debtor to the secured creditor, such secured creditor will be considered to be secured only to the extent of the value of such security interest and shall be considered an unsecured creditor for the remaining value.

An ‘Explanation’ inserted to Section 53(1)(e)(i) of the Code clarifies that Central and State government Dues, whether or not secured, shall not have higher order of priority under Section 53(1) of IBC 2016.

An illustration has also been added to Section 53(2) of the Code to clarify that the type of inter-se priority arrangements between creditors at the same level of priority is valid and will not be disregarded.

LKS Comments:

The above amendments provide much needed clarity with respect to treatment of debts owed to secured creditors which are not covered by a security interest and the manner in which the secured creditors will be treated for the unsecured portion. Further the treatment that should be meted to government dues under waterfall mechanism has been set in stone. 
 

• The above amendments are not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

13. Introduction of Creditor Initiated Insolvency Resolution Process (‘CIIRP’) [Clause 40]

The IBC Amendment Act 2026 inserts Chapter IV- A to introduce CIIRP. Some of the key aspects of the CIIRP framework are as follows:
 

• It may be initiated only by specified financial creditors; 
• It is to be initiated out-of-court, with at least 51% (by value of debt) of the notified financial creditors agreeing to initiate CIIRP 
• During CIIRP, management of the company will remain with the debtor, subject to oversight by the resolution professional.
• Further it is proposed that once CIRP has commenced by an Operational creditor or Financial creditor and is ongoing, CIIRP cannot be initiated against such Corporate debtor.
• CIIRP is required to be completed within a period of 150 days extendable by 45 days by the NCLT consequent to an approval by the COC (66% of the voting value).
• If no resolution plan has been received within the 150 days period or a plan is rejected or the directors and personnel of the Corporate debtor do not cooperate with the resolution professional, Adjudicating authority shall pass an order to convert the CIIRP into CIRP. Further COC can also decide at any time to convert the CIIRP into a CIRP and seek an order from the NCLT for that conversion.
   

LKS Comments:

The introduction of CIIRP represents a strategic shift blending a debtor-in possession model powered by strong creditor oversight, where it is expected that creditors would be empowered to resolve financial distress more swiftly and in a more targeted fashion, with a less judicially intensive mechanism. The creditor-led insolvency resolution model draws inspiration from international insolvency regimes, to enable a prefatory mechanism for out-of-court redressal of genuine business failures. Regulations are awaited for operationalising CIIRP. 
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

14. Group Insolvency [Clause 42]

The IBC Amendment Act 2026 introduces Chapter V-A which provides a group insolvency regime to enable coordinated resolution of interconnected entities within the same corporate umbrella.

Some salient features are a common bench may preside over the coordinated conduct of proceedings by common insolvency professionals, and a joint committee of creditors of the debtors.

LKS Comments:

This concept is influenced by international best practices and the UNCITRAL’s model on group insolvency. It is expected to facilitate improved coordination between insolvency resolution and liquidation process for Corporate debtors that form part of a group to maximise the value. The Rules yet to be prescribed are expected to lend more clarity over the implementation of the scheme for group insolvency. 
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

15. Cross Border Insolvency [Clause 71]

The IBC Amendment Act 2026 introduces Section 240C, empowering the Central Government to make rules for insolvency matters, involving cross border transactions.

LKS Comments:

The Code currently enables a bilateral arrangement for enforcing the Code. The Code posits that the Central Government may execute agreements with Government(s) of any other country/countries outside India, for enforcing the IBC 2016[5], and for requesting details or evidence as to existence of offshore assets of a Corporate debtor[6]. The amendment is a significant step towards aligning India’s insolvency regime with global best practises and improving investor confidence.
 

• The above amendment is not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

16. Miscellaneous Amendments:
 

• Clause 43 of the IBC Amendment Act 2026 inserts Section 61(6) which provides that Hon’ble National Company Law Appellate Tribunal shall dispose of the appeal within three months from the date of its receipt.
• Clause 48 of the IBC Amendment Act 2026 inserts Sections 67(B) and Section 67(C) by which punishment for contravention of moratorium (i.e., Section 14 of IBC 2016), resolution plan by Corporate debtor or any of its officer, Creditor and non-disclosure of dispute or payment of debt by operational creditor have been decriminalized. Instead, penalty have been provided for such contraventions.
   

LKS Comments: 

 The decriminalisation of the offence(s) appears to be aimed at distinguishing venial breaches from grave misconduct and proportionately using civil penalties as a deterrent framework in place of criminal consequences.
 

• The above amendments are not in force as on date. 
• The effective date will be notified by Central Government in the Official Gazette.
   

CONCLUSION:

Targeted reforms introduced in the IBC Amendment Act 2026, portend alignment with global best-practises, aimed at instilling an investor-friendly insolvency regime. Innovative concepts such as the CIIRP enabling out-of-court resolutions with debtor-in-possession models may herald a more collaborative process, and the Rules/Regulations will govern the on-ground implementation. Pioneering frameworks such as cross-border insolvency are designed to ease out delays, empower creditors and maximise asset recovery. These changes augur a robust, regime that restores creditor-confidence, and lends to overall economic resilience.

[1] 2023 9 SCC 545

[2] (2022) 8 SCC 352; Axis Bank Limited v. Vidarbha Industries Power Limited [2023 7 SCC 321].

[3] S.S. Engineers v. Hindustan Petroleum Corpn. [2022 SCC OnLine SC 1385].

[4] (2025) 5 SCC 209

[5] See section 234 of IBC, 2016.

[6] See Section 235 of IBC, 2016.