Understanding the Creditor-Initiated Insolvency Resolution Process (CIIRP) under the IBC Amendment Bill, 2025

India’s insolvency framework is poised for a significant transformation with the introduction of the Creditor-Initiated Insolvency Resolution Process (CIIRP) under the newly proposed Insolvency and Bankruptcy Code (Amendment) Bill, 2025. It is important to note that this amendment is currently only a proposed law and has not yet been enacted. The Bill was introduced in the Lok Sabha during the Monsoon Session and has been referred to a Select Committee of Parliament for further examination. This amendment represents a shift towards a faster, creditor-driven process designed to resolve financial distress efficiently while minimizing judicial involvement.

Key Features of CIIRP:

a) Creditor empowerment: Financial creditors holding at least 51% of the debt value can initiate insolvency resolution without immediately involving the National Company Law Tribunal (NCLT).

b) Debtor-in-possession: The corporate debtor’s existing management retains operational control during the process but under the supervision of a resolution professional.

c)  Time-bound process: CIIRP must be completed within 150 days, extendable by an additional 45 days, ensuring prompt resolution.

d) Conversion to CIRP: If resolution is not achieved within the time frame, the process converts into the traditional Corporate Insolvency Resolution Process (CIRP) overseen by the NCLT.

e) Debtor rights: The debtor can file an objection to the initiation within 30 days from the initiation notice.

This hybrid framework draws from global best practices by providing creditors with a streamlined resolution pathway while safeguarding debtor interests and business continuity.

What it means:

a) For creditors: CIIRP may facilitate faster recovery of dues with lesser procedural delays and litigation.

b) For distressed companies: Retaining management control during the process offers an opportunity to restore financial health under creditor oversight.

c) For the insolvency ecosystem: The new regime aims to reduce bottlenecks, speed up resolution timelines, and improve overall recovery rates.

Understanding this evolving insolvency framework becomes important for businesses and creditors alike to navigate financial distress successfully. This amendment aims to reduce delays and enhance creditor recoveries by allowing earlier intervention by creditors, while maintaining appropriate safeguards for the debtor. The CIIRP mechanism is expected to promote quicker resolution and maximize asset value, aligning India’s insolvency process closer to international best practices.