The IBC (Amendment) Bill 2025: Bypassing the NCLT Bottleneck to Save the Code

The Death of the 330-Day Deadline and the Desperate Need for Reform

Litigating insolvency in India has become an exercise in diminishing returns. When the Insolvency and Bankruptcy Code (IBC) was enacted in 2016, it was heralded as the death knell for the promoter-friendly, endlessly delayed BIFR regime. We were promised a strict timeline. Yet, as Finance Minister Nirmala Sitharaman introduced the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 in the Lok Sabha, the grim reality of our tribunals was laid bare on the floor of the Parliament.

Between April and December 2025, the average resolution time ballooned to a staggering 764 days. This is up from 597 days in March 2025, and lightyears away from the statutory mandate of 330 days under Section 12 of the Code. The NCLT has become a victim of the very litigation culture the IBC sought to cure. In response, the Ministry of Corporate Affairs is pulling the ultimate emergency brake: taking the resolution process out of the tribunals.

Enter the Out-of-Court, Creditor-Led Framework

The 2025 Bill—the seventh amendment to the Code and the first since 2021—proposes what is arguably the most radical shift in Indian insolvency practice to date: a creditor-led, largely out-of-court resolution framework. For practicing lawyers, this changes the entire battlefield.

Under the proposed framework, the process carries a strict 150-day deadline. But the real kicker is the severe limitation placed on the National Company Law Tribunal (NCLT). Currently, tribunals are bogged down by endless Interlocutory Applications (IAs) challenging the admission of claims, forensic audit reports, and the commercial wisdom of the Committee of Creditors (CoC).

The new amendment seeks to reduce the NCLT’s role to merely confirming the moratorium and rubber-stamping the final resolution plan. By stripping the Adjudicating Authority of its micro-management powers during the CIRP, the legislature is sending a clear message: commercial resolutions belong in the boardroom, not the courtroom.

The Section 60(5) Trap: Why the NCLT is Choking

To understand why this legislative bypass is necessary, one only needs to look at the recent NCLAT ruling regarding frozen demat accounts. In early 2026, the NCLAT was forced to step in to uphold the NCLT’s power under Section 60(5) of the IBC to direct the de-freezing of demat accounts of corporate debtors, dismissing pleas by the BSE.

While the NCLAT correctly ruled that regulatory restrictions cannot block the realization of a debtor’s assets once ownership is undisputed—reinforcing the supremacy of the IBC over the SEBI Act and BSE bye-laws—this case perfectly illustrates the systemic rot. Section 60(5), the residuary jurisdiction clause, has become a dumping ground for inter-regulatory turf wars. Every time a statutory body (be it the BSE, the ED, or the tax department) refuses to yield to the IBC, the resolution professional (RP) is forced to file an IA. Months turn into years. The 2025 Bill's out-of-court push is a direct legislative reaction to this judicial gridlock.

Cross-Border and Group Insolvency: Finally Catching Up

Beyond the out-of-court shift, the 2025 Bill finally introduces statutory frameworks for cross-border and corporate-group insolvency. For years, practitioners have relied on ad-hoc, NCLAT-crafted mechanisms (like the Videocon group consolidation) to deal with intertwined corporate structures.

With a formal group insolvency framework, lenders will no longer have to file separate Section 7 petitions for the holding company and its subsidiaries, only to pray for consolidation later. Similarly, the adoption of cross-border protocols (likely mirroring the UNCITRAL Model Law) will empower RPs to chase down assets siphoned off to foreign jurisdictions without relying on cumbersome bilateral treaties.

Sharpening the Edges: Recent NCLT/NCLAT Trends

While Parliament works on the macro structural changes, the tribunals are continuing to aggressively prune the existing jurisprudence. Two major early-2026 developments stand out for litigators:

• The Section 10A Shield: The NCLAT has emphatically ruled that a Section 7 application must be strictly confined to defaults committed after the Section 10A period (the Covid-19 suspension window). Lenders trying to intelligently bundle pre, during, and post-Covid defaults into a single date of default are facing outright dismissal.
• Section 95 Personal Guarantors: NCLTs are getting stricter on personal insolvency. A recent early-2026 decision dismissed a Section 95 petition simply because the guarantee had not been validly invoked as per the specific contours of the guarantee deed. The days of treating a corporate default as an automatic trigger for the personal guarantor's insolvency are over. Strict contractual compliance is now a prerequisite.

The Takeaway for Practitioners

The writing is on the wall: the golden era of endless NCLT litigation during the CIRP is coming to a close. As the IBC (Amendment) Bill, 2025 becomes law, the premium will shift from litigators who can argue Section 60(5) applications, to transaction advisors who can negotiate swift, out-of-court settlements within the 150-day window.

For law firms, this means pivoting your restructuring teams. Advise your financial creditors to build robust internal mechanisms for evaluating resolution plans quickly, because they will no longer have the luxury of hiding behind NCLT delays. The IBC is going back to its roots: commercial wisdom, minimal judicial interference, and brutal efficiency.