Impact of IBC Amendment Bill 2025 on Distressed JVs in India

Introduction

The introduction of Insolvency and Bankruptcy Code, 2016 (‘IBC or Code’) represented a pivotal reform in the management of distressed companies in India. For the first time in India, an efficient creditor-focused mechanism addressing distressed companies was put into place. While the enactment of IBC was seen as a major transformation, its implementation revealed certain lacunas, necessitating the need for judicial intervention and amendments to bridge the gaps. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (‘Bill’) aims to resolve these gaps amidst various Supreme Court rulings which have also created certain unintended ambiguities.

The Bill proposes remarkable changes to the Code by introducing structural changes, reshaping timelines and aligning the Code with global best practices. The Bill is currently under discussion, and these amendments will come into force once the Bill is enacted.

Once implemented, these changes will further boost acquisitions and joint venture opportunities in distressed companies in India. Additionally, beyond promoting new joint ventures opportunities via distressed acquisitions, these reforms will also support the revival of existing distressed Joint Ventures (‘JVs’) impacted by internal conflicts or external challenges.  This article analysis the major reforms proposed under the Bill and their impact on JVs in India.

Key Amendments Proposed and their impact on JVs

1. Mandatory admission of Corporate Insolvency Resolution Process (‘CIRP’)

Section 7(5)(a) of the Code provides that the Hon’ble National Company Law Tribunal (‘NCLT’) ‘may’ admit the application as submitted by financial creditor if (a) a default has occurred and the application is complete; and (b) no disciplinary actions are pending against the proposed resolution professional. This section was examined by the Supreme Court in the case of Vidarbha Industries Power Limited v. Axis Bank Limited[1]. The Court confirmed that the Hon’ble NCLT has the discretion to accept or reject the application under section 7(5)(a) of the Code even if both the conditions are met. The Bill proposes to limit this discretion of NCLT by replacing the word ‘may’ with ‘shall’.  Therefore, if the afore-mentioned twin test is satisfied, the NCLT must mandatorily admit the application without considering any other factors.

Distressed JVs will be able to benefit from this requirement of mandatory acceptance of applications by NCLTs as it will curb unnecessary delays and expedite the process of initiation of  CIRP.

2. Restoration of CIRP

Under the current regime, if NCLT does not receive a resolution plan within the prescribed period, or rejects it for non-compliance, it must order the liquidation of such company. However, the Bill proposes an amendment by virtue of which, before passing an order of liquidation, an application for restoration of CIRP can be submitted by the Committee of Creditors (‘COC’). The NCLT may, after consideration of such application, pass an order to restore the CIRP. The maximum duration for completion of the restored process is proposed to be 120 days.

Since the enactment of IBC, it has provided various opportunities for mergers and acquisitions (‘M&A’) in distressed companies. The Bill further creates new opportunities for distressed M&A by providing an additional opportunity before liquidation of such companies. Further, it is proposed in the Bill that this additional opportunity be made available to companies against which CIRP has been initiated before the date of enforcement of the Bill (i.e. once it becomes an Act), but liquidation order is not passed yet.

Therefore, distressed JVs against which CIRP has been initiated but resolution plans have failed on account of procedural lapses or unavoidable delays may take advantage of this additional opportunity.

3. Cross-border Insolvency

A major shortcoming of the Code was the absence of a comprehensive mechanism for dealing with cross-border insolvency. This shortcoming was highlighted in the case of Jet Airways wherein concurrent proceedings were initiated in India and Netherlands. The NCLT held that concurrent proceedings will create delays and complications and declared that since the company is registered in India the courts in India will have exclusive jurisdiction[2]. This order was challenged before the NCLAT and the NCLAT directed that the resolution professional in India and the Dutch administrator should enter into an agreement to extend co-operation to each other[3].  Based on such direction, the parties executed an agreement which was later approved by the NCLAT.  Now, to overcome the absence of a legal framework, the Bill aims to lay a proper procedure for cross -border insolvency by empowering the Central Government to make rules for administering cross border insolvency.

4. Clean Slate Principle

The Bill proposes to codify the clean slate principle, i.e., once the resolution plan is approved by NCLT, all claims existing prior to the date of approval that are not covered in the plan will stand extinguished.  Further, no proceedings can be initiated in any court of law based on such claims. This principle protects the successful resolution applicant i.e., the acquirer from any unforeseen claims.

Codification of the clean slate principle will enhance the investors’ confidence by protecting their interests post approval of resolution plan. This will also encourage potential investors to invest or form new joint ventures in India through investment in distressed companies.

5. Approval of Competition Commission of India post COC approval

The proviso to Section 31(4) of the Code mandates that the approval of Competition Commission of India (‘CCI’) must be obtained prior to the approval of the plan by COC. The Supreme Court in the recent case of Independent Sugar Corporation Ltd. v Girish Sriram Juneja & Ors.[4] interpreted this proviso and confirmed that the CCI approval must be mandatorily obtained prior to the approval of plan by COC.

The Bill proposes to dispense with the requirement of prior approval of CCI and mandates that such approval must be obtained any time before the resolution plan is submitted to the NCLT.

6. Time-limit for an order on the resolution plan

A new sub-section (2A) is proposed to be added to Section 31 of the Code to cut down on delays in insolvency proceedings. This sub-section imposes a 30-day timeline on NCLT to pass an order for either approval or rejection of the resolution plan as approved by COC. It further mandates to record the reasons in writing, if an order is not passed within 30 days from the receipt of the plan.

This insertion will ensure a time-bound and effective completion of the resolution process of the distressed companies in India.

Conclusion

The Bill represents a remarkable step towards addressing critical issues surrounding the insolvency process in India. These proposed amendments aim to make the Code a more efficient, predictable, and favourable regulatory framework for investors. Once implemented, the Bill is expected to create more investment and joint venture opportunities in distressed companies in India.

[1] (2022) 8 SCC 352

[2] 2019 SCC Online NCLT 23875

[3] 2019 SCC Online NCLAT 1566

[4] 2025 SCC Online SC 181