India looks to boost its restructuring and insolvency framework: "next generation" reforms being considered 

What you need to know

• The Indian government has proposed a comprehensive set of legislative amendments to the country's omnibus restructuring and insolvency legislation, the Insolvency and Bankruptcy Code, 2016 (the "Code"), indicating a renewed interest to make legislative interventions to develop the restructuring and insolvency eco-system.
• The amendments are broadly intended to: (i) address controversial judicial rulings, (ii) manage inefficiencies, and (iii) introduce "next generation" reforms.
• Key next generation reforms envisaged include enabling frameworks to resolve enterprise group insolvencies and cross-border insolvencies, and the introduction of a new creditor-initiated insolvency resolution process.
• There are limited details on how the cross-border insolvency and enterprise group insolvency frameworks will ultimately shape up. However, these are unlikely to be modelled entirely on international precedent or "best practice", such as the UNCITRAL Model Laws.
• The creditor-initiated insolvency resolution process is a modified corporate insolvency resolution process and is not akin to an English pre-pack. The scope for its use will need to be tested.

Background to the Code

The Code, enacted in 2016, consolidated and modernised India's restructuring and insolvency framework against the backdrop of significant "twin balance-sheet" stress, i.e. corporate as well as bank stress.

It introduced both provisions for a court-supervised creditor-in-control restructuring process called the Corporate Insolvency Resolution Process ("CIRP") as well as the insolvent liquidation of corporate entities. These processes are intended to be linear, meaning that a corporate entity enters insolvent liquidation only if the CIRP fails.

The CIRP itself is designed to be an "auction"-style process, in which various offers to resolve the debtor's stress are invited, with the best offer (i.e. resolution) plan being approved by a committee of financial creditors (the "CoC") before being placed before court (i.e. the National Company Law Tribunal or "NCLT") for approval. After the NCLT approves the resolution plan, it becomes binding on all creditors (whether financial creditors or not) and other stakeholders of the debtor. Importantly, there are wide prohibitions on pre-existing management being able to propose to resolve the debtor's stress and regain control of the debtor's business (which is passed on to an independent insolvency professional who acts under the supervision and control of the CoC when the CIRP is initiated), widely known as 29A prohibitions.

The Code was generally considered to have enabled various successful outcomes, particularly in its initial years of enactment. However, more recently, concerns have been raised that controversial judicial rulings, inefficiencies and lack of legislative clarity to deal with complex situations such as group and cross-border insolvency could impede successful outcomes under the Code.

Overview of the newly proposed amendments

Against this backdrop, a comprehensive set of amendments has been proposed in 2025 – the first in four years.¹ The amendments proposed broadly fall into three categories:

• Amendments to address controversial judicial rulings: These include, amongst others, amendments (i) clarifying that government bodies will not be considered secured creditors if their security is granted by statute and not contractually negotiated with the debtor, (ii) removing judicial discretion to refuse commencement of the CIRP if statutory thresholds (requiring a minimum payment default) are met, and (iii) allowing the withdrawal of in rem CIRP proceedings only once approval of a committee of creditors is obtained.
• Amendments to "speed up" process and address inefficiencies: These are targeted at addressing judicial delays, streamlining the transition from the CIRP into insolvent liquidation, and providing greater clarity on the inter-se rankings of secured creditors.
• Amendments to introduce "next generation" reforms: These include enabling frameworks to resolve enterprise group insolvencies and cross-border insolvencies, and the introduction of a new creditor-initiated insolvency resolution process.

Whilst these amendments are not yet law,² their announcement itself is significant. It signals the government's renewed willingness to find legislative solutions to develop India's restructuring and insolvency space, possibly to address anticipated distress following the announcement (and imposition) of steep tariffs on Indian exports to the US.

Notably, the government appears to be willing to test new frameworks to enhance the tools available to resolve distress in the country through its proposed "next generation reforms".

"Next generation" reforms

The key "next generation" reforms proposed are as follows:

• Enabling framework to resolve enterprise group insolvencies: The proposed amendments enable the Central Government to put in place subordinate legislation to address group insolvencies.
  
  Whilst the government has not put out draft subordinate legislation that sets out the framework it intends to ultimately put in place, the framework envisaged is broadly "a voluntary procedural coordination framework". This framework will allow for enterprise group members to be treated as separate legal personalities but enable coordination through "the appointment of a group coordinator to facilitate communication, information sharing, and alignment of proceedings" based on an agreement between the enterprise group members and their COCs.³ This framework is intended to supplement Indian judicial rulings which have largely favoured dealing with group insolvency cases using US-style substantive consolidation strategies, i.e. treating multiple group members as a single entity for the purposes of insolvency resolution.
  
  Interestingly, although the UNCITRAL has also published a Model Law on Enterprise Group Insolvency ("MLEGI"), which countries like the UK and Singapore are considering adopting, it appears unlikely that the Indian framework will be based on the MLEGI. Instead, the amendments and accompanying notes of clauses indicate that the framework for group insolvency in India will likely be in line with the recommendations of the Indian insolvency regulator's Working Group on Group Insolvency's Report from 2019, which was subsequently endorsed by the Report of the CBIRC-II on Group Insolvency released in 2021.

• Enabling framework for cross-border insolvency: The proposed amendments also empower the Central Government to put in place subordinate legislation to deal with cross-border insolvencies of corporate entities.
  
  As with the group insolvency framework, the government has not put out draft subordinate legislation that sets out the framework it intends to ultimately put in place. The relevant proposed provision and accompanying notes on clauses are scant on details but do indicate that the rules could provide for designation of separate, specialised judicial "benches" to deal with cross-border insolvency cases.
  
  Notably, there appears to be no indication that the framework the government intends to adopt will be based on the UNCITRAL Model Law on Cross-Border Insolvency ("MLCBI"). The MLCBI, which has been in play since 1997, has been adopted by 63 jurisdictions in 60 states, and has previously also been debated extensively by Indian policymakers. In 2018, the Insolvency Law Committee recommended the adoption of the MLCBI with certain amendments and the introduction of a new Part Z to the Code. The Cross-Border Insolvency Rules / Regulations Committee then recommended detailed subordinate legislation that could complement Part Z in 2020. It would enhance certainty if the government would indicate, perhaps as part of the forthcoming Parliamentary process, what it sees as being an appropriate cross-border insolvency framework for India.

• Creditor-initiated insolvency resolution process: Finally, the proposed amendments also introduce a new creditor-initiated insolvency resolution process that enables certain (to be notified) financial creditors to trigger a restructuring, i.e. an insolvency resolution process for a debtor that has committed a minimum payment default without needing to approach the court. Unlike the CIRP, the debtor's pre-existing management remains in place. However a licensed insolvency professional is appointed to run an "auction-style" process to solicit offers to resolve the debtor's stress, similar to a CIRP. A CoC is also formed in this process and ultimately approves a resolution plan, which is then put to the NCLT for final approval. The CoC and insolvency professional also have oversight over the management's activities.
  
  Although this process was initially expected to be India's "pre-pack" for large companies,⁴ this process is structurally very different from an English pre-pack⁵:
  •  Unlike a pre-pack, in which marketing takes place prior to the appointment of an administrator and the sale of the business occurs shortly after appointment, the creditor-initiated insolvency resolution process is expected to run for 150 days (extendable by another 45 days). The entire marketing process is expected to commence after the debtor is in a creditor-initiated insolvency resolution process, with a resolution plan expected to be approved by the CoC and NCLT at the culmination of this process.
  • Pre-packs in England also involve very little interface with court. Administrators are often appointed out of court and the sale of the debtor's business is conducted by the administrator without needing court approval. In contrast, the creditor-initiated insolvency resolution process, similar to a CIRP, continues to involve extensive interface with the NCLT. Only initiation of this process is intended to be out of court. However, in practice, it appears likely that court interface will be involved even for initiation of this process as court approval is needed to obtain moratorium protection (which will likely be critical to negotiate the restructuring) and as the debtor has the option to challenge the initiation before the NCLT.
  • English pre-packs can also result in sales of business to connected parties of the debtor or to creditor affiliates. However, 29A prohibitions apply to the creditor-initiated insolvency resolution process, meaning that the debtor's pre-existing management can offer a resolution plan in extremely limited circumstances. Judicial rulings have also cast doubt on the ability of creditors and/or their affiliates to propose resolution plans in India, and it remains unclear if a resolution with a creditor affiliate can be attempted through this process.

In view of this, in reality the creditor-initiated insolvency resolution process appears to be a modified CIRP rather than a true pre-pack arrangement. If the creditor-initiated insolvency resolution process is enacted as proposed, its use will most likely be limited to those cases where the debtor and creditors are agreed on the initiation of the process, and the debtor is in a very early stage of stress. This would mean that its pre-existing management is not hit by 29A prohibitions, and is able to offer a resolution plan.⁶ Whether this justifies the creation of a new creditor-initiated insolvency resolution process ultimately remains to be seen.

Conclusion

The Indian government's announcement of amendments to the Code signals welcome legislative re-engagement with the restructuring and insolvency eco-system. How the government's proposed "next generation" reforms shape up and are used in practice remains to be seen – perhaps the Parliamentary process that lies ahead will shed some more light on and help stress test some of the government's proposals.

Want to know more? 

• The insolvency and bankruptcy code (amendment) bill, 2025 (12 August 2025)