Should liquidation always mean death, or can it offer a second life? Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2025 have quietly erased the route that once allowed a second chance for a failing business to be sold as a going concern. Planned as a last-resort revival mechanism when the Corporate Insolvency Resolution Process (CIRP) failed, Regulations 32(e), (f) and 32A aimed to save residual enterprise value and sustain employment even in liquidation.
The October 14th Amendment omits Regulation 32A and deletes clause (f) of Regulation 31A (1), which allowed the Stakeholders’ Consultation Committee to advise on marketing strategies for going-concern sales. Going forward, liquidators can sell only individual assets or clusters, not the enterprise as a whole. Although the notification does not clarify the reasoning, the change suggests an effort to return liquidation to its primary role of final dissolution, after years of blurred boundaries between resolution and liquidation.
While this correction was arguably overdue, it also prompts important questions about whether efficiency gains are coming at a cost of value. Has India’s rescue culture been sacrificed at the altar of procedural purity? Is the CIRP mechanism sufficient to save a business once it goes to liquidation? This piece looks at what the amendment changes, why it was made, and what it might cost us in terms of value, revival, and what changes are due in CIRP.
Efficiency or a Second Chance at Value Maximisation?
Nearly 70% of CIRPs end in liquidation. The objective of any insolvency procedure is to maximise returns to creditors, and the mechanism used to achieve that goal depends on circumstances and the availability of assets. Usually, the greatest returns to creditors are achieved by maintaining a business as a going concern rather than being broken up for piecemeal liquidation. As of March 2025, CIRP’s take an average of 713 days with recoveries of about 33%, while liquidations take roughly 508 days but yield under 10%. . Regulation 32A, introduced in 2019, was originally intended as a pragmatic response to this problem. It allowed liquidators to sell the entire business as a going concern, keeping assets, employees, and licenses intact. In theory, this preserved enterprise value even when formal resolution failed. The Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India, held “that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor.”
However, such second chances of rescue have led to repeated bidding rounds, prolonged processes, and a significant lack of solid outcomes. Moreover, going concern sales have consistently yielded lower recoveries compared to direct dissolutions. Data reveals that creditors recovered only 2.4% through going concern sales (75% of liquidation value), whereas regular dissolution provided a higher recovery of 3.7% (101% of liquidation value). In the IBBI’s view, such open-ended attempts diluted the Code’s primary objective of time-bound resolution and risked transforming liquidation into a quasi-revival platform. Speed is a critical factor in safeguarding value, with the Bankruptcy Law Reforms Committee (BLRC) emphasising that “speed is of the essence” in matters of insolvency. The longer the process drags, the greater the depreciation of assets, the deeper the loss for creditors. Faster liquidation frees locked-up capital that can be redeployed to finance viable projects, and helps the economy recycle capital faster.
Stakeholder Impact: Winners, Losers, and Trade-offs
From a practical angle, with over a lakh insolvency cases waiting before the NCLT and delays steadily eroding creditor trust, the reasoning behind the amendment is understandable. Liquidation can’t be expected to chase revival and finality at the same time. If the company is viable, it must be rescued during CIRP; if not, it should be wound up promptly. The 2025 Amendment prioritises speed, and now Judges and liquidators will have a simpler task, fewer disputes, and faster closure
But this procedural simplicity comes at the cost of flexibility, especially in borderline cases where limited rescue might still have been viable. When a business is broken up instead of sold whole, employees lose more than their jobs; they lose the continuity of their contracts and their wages. As the Supreme Court stated in Arcelor Mittal v. Satish Kumar Gupta, “the corporate debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the process…every effort must be made to keep it a going concern.” For creditors, the Amendment removes a route that once promised better recoveries. Bidders and investors will now face fragmented aucttions, for them, liquidation will become a parts market rather than a business market.
Should the law serve efficiency by freeing capital and closing files swiftly, or uphold equity by giving stakeholders a little more time to salvage value? The answer is, of course, a careful and deliberate balance. Systems that lean too heavily on liquidation often end up discouraging innovation and risk-taking. While systems that are too soft can keep money locked in businesses that have already run their course. By removing the option of selling a company as a going concern, the 2025 amendment pushes the process towards speed and closure, shutting the only window that allowed a small chance of rescue. The real challenge now is finding a way to move quickly without losing the possibility of saving what’s still worth saving.
Do we already have the answer?
The answer is not to turn liquidation into a makeshift rescue route. The CIRP already exists to revive viable firms. However, the CIRP in its current state is struggling to deliver its primary objective of time-bound resolution. Admission, which should generally take 14 days, takes more than 12 months, and resolution takes around 700-800 days, far beyond the 330-day mandate. These delays erode asset value, resulting in creditors taking massive 60-70% haircuts. The judicial intervention with stakeholders seeking an Interim Application in every step from the appointment of the Resolution Professional (RP) to the valuation report contributes to this delay. Fixing CIRP can be challenging. Overburdened NCLT Benches and courts, which prioritise “natural justice”, allowing multiple avenues of appeals, overturn any attempt to strictly enforce timelines, incentivising delays.
India can take lessons from its own Pre-package Insolvency Resolution Process (PPRIP) and Global Rescue practices to make CIRP more robust and efficient. For example, Chapter 11 of the US Bankruptcy Code, where the plan is fully negotiated and voted on by the creditors before the case begins, with Debtors-in-Possession (DIP) retaining the control and since the plan is already voted on, the court hearing becomes a procedural formality. In 2021, India introduced its own PPIRP for MSMEs. But unlike its US Counterpart, it failed in practice, as of now, only 16 applications have been admitted, and only 10 resolution plans have been approved. Why? Because Promoters avoid PPIRP, fearing immediate invocation of their personal guarantees, risking their own assets. The strict default threshold of 10 lakh to 1 crore excludes many small players. To make matters worse, Operational Creditors had no voting rights in the CoC, prompting many of them to file parallel litigation or winding-up petitions since their interests were sidelined.
Taken together, these insights show what a more workable CIRP framework should. Allow DIPs to retain control during the process, incentivise early filing, and a Monitoring Professional with veto power over major cash outflows should be appointed to prevent asset stripping. The failure of quick admission stems from the competing claims of creditors and fear of unfair treatment forcing them file dispute over validity of the default. If 66% of lenders sign an Restructuring Support Agreements (RSAs), the NCLT should be mandated to admit the case within 14 days. When no major creditor objects to admission NCLT’s role at admission becomes a simple formality, eliminating the 12-month negotiation phase.
When a large company enters CIRP, it owes thousands of small suppliers forcing them to accept massive haircuts, resulting in objections to resolution plans en masse. Mandatory payment of operational creditors below a fixed threshold will prevent massive litigation from suppliers that currently chokes the system. Empower the NCLT to dismiss “nuisance litigation” from minority dissenters if the plan meets the statutory “fair value” checks.
Banks routinely decline PPRIP’s as valuations lack independent verifications, and CIRP provides more competitive valuation with multiple potential buyers. Mandatory consideration of PPRIP not mandatory acceptance reinforced with Swiss Challenge mechanism (where in a 30-day window—any external bidder can submit a competing offer, and the highest bidder wins). Buyers know competition may emerge even within the pre-pack window, and market competition naturally pushes bids closer to going-concern value.
The 2025 Amendment is an attempt to draw a line in the murky sand between resolution and liquidation. Ideal value maximisation lies not in how fast we close a company, but in how effectively we give it a chance to recover while it still can. Strengthening CIRP would ensure that businesses with genuine recovery potential are preserved, employees are protected, and creditors realise higher returns, with liquidation being the swift, efficient alternative.
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