From Judicial Supervision to Creditor Control: A Critical Analysis of the Insolvency and Bankruptcy Code (Amendment) Act, 2026
1. Introduction
The Insolvency and Bankruptcy Code (hereafter ‘the Code’ or ‘IBC’), passed in 2016, was a consolidation of the numerous debt-recovery enactments into a unified, time-bound mechanism for tackling corporate distress. The initial years saw it being hailed as a game changer: India shot up from 108th place to 52nd place on the World Bank’s indicator for resolving insolvency, and creditors received huge sums that had been frozen under the previous regime[1]. With time, however, the old issues came back: delayed admissions of cases, extensive litigation at all stages, depreciation of assets during lengthy liquidations, and a string of judicial pronouncements that disrupted the fine balance that the Code tried to achieve.
Against this background, Parliament passed the IBC (Amendment) Act, 2026 (hereafter ‘the 2026 Act’). It was assented to by the President on 6 April 2026, and notified as Act No. 6 of 2026. It was introduced in Parliament as Bill No. 107 of 2025[2], and is the sixth statutory amendment to the Code. This article attempts to examine the key provisions of the 2026 Act in relation to the previous state of law under various sub-headings, compare their impact, and since most of the amendments have arisen out of judicial interventions analyze the same with the relevant case-law as context. In essence, the 2026 Act seeks to take the Code from the judicial supervision model to the creditor-driven model.
2. Mandatory Admission of Applications: Displacing Vidarbha Industries
Perhaps the most important reform in terms of procedure is in the admission of insolvency petitions. As per the unamended Code, Section 7(5)(a) provides that the Adjudicating Authority “may” admit the application of a financial creditor, while Section 9(5) uses the mandatory “shall” for operational creditors. The Supreme Court relied upon the textual distinction in Vidarbha Industries Power Ltd. v. Axis Bank Ltd[3]., to hold that “may” gave a real discretion to the Tribunal, which enabled it to consider the overall solvency of the corporate debtor and feasibility of a resolution before admitting a petition despite the proof of debt and default. The review petition was dismissed, though subsequently the decision was restricted to its facts.
The Vidarbha decision conflicted with an earlier jurisprudence. In Innoventive Industries Ltd. v. ICICI Bank[4], and Swiss Ribbons (P) Ltd. v. Union of India[5], it was held that proof of debt and default was the sole gateway to admission of an application; the days of a “defaulter’s paradise” were over; and in E.S. Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd.[6], it was held that the Tribunal could not impose a settlement against the will of the parties. Later, in M. Suresh Kumar Reddy v. Canara Bank[7], Vidarbha was distinguished and it was reiterated that the admission is a compulsion once the default is proved.
The 2026 Act seeks to settle the debate through legislation. The Adjudicating Authority is now mandated to decide Section 7 or Section 9 applications within fourteen days and “shall” admit the petition in case of satisfaction of only three requirements: the proof of default, completeness of the application, and absence of any disciplinary proceedings against the proposed professional. Nothing else can be considered for refusal of admission, and any delay beyond fourteen days must be put in writing. For regulated financial creditors, a record from an information utility would be enough to prove the default. Section 10 has been amended to disallow the corporate debtor from appointing the interim resolution professional itself. In effect, the amendment reinstates the Innoventive/Swiss Ribbons approach, and overrules Vidarbha
3. Redefining “Security Interest”: The Legislative Answer to Rainbow Papers
Another amendment relates to the priority of government dues. Section 3(31) of the Code defines “security interest”, while Section 3(30) defines “secured creditor”. In State Tax Officer v. Rainbow Papers Ltd.[8], the Supreme Court held that a statutory first charge there, made under Section 48 of the Gujarat Value Added Tax Act, 2003 was a security interest “by operation of law”, which made the State a secured creditor and therefore a resolution plan that ignored its dues could be rejected. The review petitions were dismissed in Sanjay Kumar Agarwal v. State Tax Officer[9], but in a co-ordinate bench in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat (P) Ltd.[10], the decision was confined to its facts and the waterfall under Section 53 emphasised.
The Rainbow Papers case caused quite some confusion, and statutory authorities in various states began claiming to be secured creditors, delaying the approval of plans. The 2026 Act has responded to it by inserting an explanation to Section 3(31). According to it, a security interest arises only if it was created by an arrangement between two or more parties. Charges that arise merely due to the operation of a tax statute do not come under this. An amendment to Section 53 also limits the priority of the government dues.
4. The Creditor-Initiated Insolvency Resolution Process (CIIRP)
While most of the other changes in the Code can be considered fine-tuning of existing structures, the most innovative change in the Act lies in the introduction of a completely new Creditor-Initiated Insolvency Resolution Process as a separate chapter. CIIRP may only be initiated by designated classes of financial creditors holding not less than fifty-one per cent of the value of the reported financial debt, provided that the debtor receives prior notice and the chance to make submissions in response. Certain types of companies, and any entity which recently undertook an insolvency or pre-packaged procedure, are disqualified.
What makes CIIRP different from the usual Corporate Insolvency Resolution Process (“CIRP”) is the combination of the following two elements. First, the debtor’s management remains in control of the business in question throughout the procedure, subject to supervision by the appointed resolution professional. And second, there is no requirement that the admission stage should involve a determination of default by the Tribunal, while the moratorium under Section 14 will not be automatic. The entire process is set to be time-bound, and if necessary, it may be transformed into a regular CIRP if a plan is not adopted or the debtor resists the procedure. By adopting the debtor-in-possession system in line with its global equivalent, CIIRP provides a faster way for creditors to restructure a company.
5. Decoupling Avoidance Transactions: Codifying Venus Recruiters
The Code gives the resolution professional power to challenge preferential, undervalued, extortionate and fraudulent transactions (Sections 43-51 and 66). In practice, however, it remained unclear whether such “avoidance” applications survive the adoption of a resolution plan once the professional is functus officio. In the case Venus Recruiters (P) Ltd. v. Union of India[11] a Single Judge of the Delhi High Court took the negative view. But that decision was overturned in the recent case Tata Steel BSL Ltd. v. Venus Recruiters (P) Ltd.[12], where the Division Bench found that avoidance proceedings are ancillary to, and independent of, the resolution of the corporate debtor, that they survive the completion of the CIRP and vest in the interest of the creditors.
The 2026 Act follows the same line, adding further clarification that the conclusion of the CIRP or liquidation will have no effect on the ongoing avoidance proceedings; that the look back period for such transactions is extended to two years from the start; that Section 47 is amended to allow creditors themselves to pursue recovery where the professional and liquidator fail to do so; and that liquidator, not just the professional, is now enabled to bring fraudulent or wrongful trading proceedings under Section 66. A new provision covers the avoidance of transactions defrauding creditors and provides for reversal to the former state of affairs.
6. Liquidation, Committee Oversight and the “Clean Slate”
The liquidation procedure is re-engineered substantially. After the liquidation order is made, the Adjudicating Authority shall refer the matter to the Board for recommending the appointment of the liquidator, and the professional conducting the CIRP shall not be able to act as the liquidator for the same debtor in an attempt to introduce some element of independence. A new Section 34A allows the Committee of Creditors to appoint another liquidator with a sixty-six per cent majority. Moreover, the Committee itself will now supervise the liquidation process. Under Section 54, the deadline of liquidation will be hard-lined it should be completed in one hundred and eighty days, which is extendible once by ninety days for reasons stated. Continuation of the moratorium will prevent the piecemeal litigation and asset stripping after liquidation order, and in certain circumstances, the liquidation procedure may be revived into the CIRP procedure.
There are two additional measures taken to guarantee the integrity of adopted resolutions. Section 12A, which allows withdrawal of admitted applications with the approval of ninety per cent of the Committee is kept but strengthened it will be possible to withdraw after the Committee is formed and is prohibited once the first resolution plan is issued. And the Code now explicitly adopts the “clean slate” principle developed in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.[13] , meaning that all other claims outside of an approved plan are extinguished, thus allowing the successful applicant to take over the debtor free from other liabilities.
7. Group and Cross-Border Insolvency; Deterrent Provisions
Finally, the long-time recognized gaps of practice are addressed in the Act. It gives the power to the Central Government to issue rules regarding the coordinated resolution of corporate groups, providing common benches or committees for interconnected companies, and, through two new Sections 240B and 240C, it establishes an electronic portal for insolvency procedures and a framework for cross-border insolvency (including recognition, relief and judicial cooperation broadly in the line of UNCITRAL Model Law), and Section 28A gives the right to the Committee to transfer with their consent the assets of a corporate or personal guarantor during the debtor’s CIRP in order to unify the estate and to prevent asset fragmentation.
To prevent abuse, new penalty provisions (Sections 64A and 183A) punish those who launch malicious or frivolous insolvency proceedings. Taken together, these measures indicate that the Code becomes a much more flexible mechanism accommodating complex, multi-entity and international insolvencies and prepared to punish its abuse.
Principal Changes at a Glance
| Provision | Position Before 2026 | Position After 2026 | Effect |
| Sec. 3(31) Security interest | Could arise by operation of law (Rainbow Papers) | Only where created by agreement of two or more parties | Statutory dues lose secured status |
| Sec. 7 & 9 Admission | “May” read as discretionary (Vidarbha) | AA “shall” admit within 14 days if default proven | Faster, rule-bound admission |
| Avoidance actions | Survival post-plan uncertain (Venus Recruiters) | Expressly survive CIRP/liquidation; 2-year look-back | Perpetrators cannot use plan as shield |
| Ch. IV-A CIIRP | Did not exist | Creditor-initiated, debtor-in-possession process | Out-of-court resolution route |
| Sec. 33, 34, 54 Liquidation | Open-ended timelines | 180 days (+90); CoC supervises; may replace liquidator | Value preserved; commercial oversight |
| Sec. 12A Withdrawal | 90% CoC consent | Only after CoC formed; barred once first plan invited | Curbs late, disruptive exits |
| Sec. 240B–240C | No group / cross-border framework | Enabling power for portal, group & cross-border rules | Aligns with global practice |
| Sec. 64A & 183A | No specific penalty | Fines for malicious / frivolous filings | Deters abuse of process |
8. Assessment: The 2026 Act: What’s Different?
Seen in totality, the reforms affect the Code along three dimensions. First, in terms of access to the process, the reforms move away from the discretionary gatekeeper approach towards a more rule-based one whereby the default is required to result in automatic commencement of the process within a fixed time limit; Vidarbha was thus reversed. Second, in terms of control, the Code now becomes more creditor-centric as creditors gain powers of initiating process via CIIRP, supervise and possibly remove the liquidator, and pursue their avoidance actions. Third, in terms of the orientation of the process, the Code is moved further towards resolution and away from liquidation with firm deadlines for the process, continued moratorium and the revival of liquidation process.
In addition, the amendments reflect the Code’s relationship with the judiciary through codification of case laws which promoted the objects of the Code namely, Innoventive, Swiss Ribbons, Essar Steel and Ghanashyam Mishra but superseding the decisions which were perceived as having caused uncertainty such as Vidarbha and Rainbow Papers. Three cautions are necessary here. First, while the Act was notified in the Official Gazette on 6th April 2026, its provisions have been brought into force in a phased manner the majority took effect on 26th May 2026 by the Ministry of Corporate Affairs Notification S.O. 2625(E) dated 22nd May 2026, and only a limited set of provisions remain to be brought into force on dates yet to be appointed by the Central Government. Second, there is much detail of the Act to be provided through regulation, especially CIIRP, group and cross border insolvency processes. Third, the promise of speediness depends on the institutional capacity of the NCLT which no statute alone can cure.
9. Conclusion
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 should not be viewed in isolation as a series of ad hoc changes but should be appreciated for what it truly is: a careful recasting of the structure of the Code itself. It attempts to restore the certainty and speed that made the Code effective in its early days through compression of timelines, empowerment of creditors, protection of completed resolutions and opening of the code to group and cross-border insolvency situations. In addition, by codifying a decade of judicial decisions by adopting some precedents and disapproving of others, it clarifies the Code itself. Whether the reform succeeds in achieving its aims will depend on the regulations which will follow and on the capacity of the tribunals who will apply it; but in any case, in terms of design, the 2026 Act represents the most substantial transformation of Indian insolvency law since 2016.
Notes:
[1] MS Sahoo, ‘Resolving Insolvency’ (Insolvency and Bankruptcy Board of India) https://ibbi.gov.in/uploads/whatsnew/faf3af70524e6c7ccf0b6762ab70216c.pdf accessed 20 July 2026.
[2] Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act 6 of 2026), assented 6 April 2026; Bill No. 107 of 2025.
[3] Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 352
[4] Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407
[5] Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17
[6] E.S. Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd., (2022) 3 SCC 161
[7] M. Suresh Kumar Reddy v. Canara Bank, (2023) 8 SCC 387
[8] State Tax Officer v. Rainbow Papers Ltd., 2022 SCC OnLine SC 1162
[9] Sanjay Kumar Agarwal v. State Tax Officer, 2023 SCC OnLine SC 1406
[10] Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat (P) Ltd., 2023 SCC OnLine SC 842
[11] Venus Recruiters (P) Ltd. v. Union of India, 2020 SCC OnLine Del 1479
[12] Tata Steel BSL Ltd. v. Venus Recruiters (P) Ltd., 2023 SCC OnLine Del 155
[13] Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657
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Author: Ritu Raj an Associate practising in the field of insolvency and restructuring with AAA Insolvency Professionals LLP.
