Introduction and Legislative Progression of the Insolvency and Bankruptcy Code
The statutory architecture governing corporate distress in India has transitioned from a fragmented debt-recovery system to a unified, time-bound, and creditor-controlled regime under the Insolvency and Bankruptcy Code, 2016. This structural evolution is underscored by significant economic recovery metrics, with creditors realizing approximately INR 4.32 lakh crore through approved resolution plans up to March 2026.
According to the Reserve Bank of India, out of INR 1,04,099 crore recovered by scheduled commercial banks through various channels, the Code alone contributed INR 54,528 crore, accounting for 52.4% of total recoveries. Despite these successes, the implementation of the Corporate Insolvency Resolution Process has faced challenges including procedural delays and value destruction due to prolonged litigation. To resolve these inefficiencies and consolidate financial stability, the legislature enacted the Insolvency and Bankruptcy Code (Amendment) Act, 2026.
The Insolvency and Bankruptcy Code Amendment Act 2026: Key Legislative Shifts
The Insolvency and Bankruptcy Code (Amendment) Act, 2026, which received presidential assent on April 6, 2026, introduces structural amendments to resolve legal ambiguities and accelerate proceedings. A critical reform is the statutory clarification that statutory dues do not possess the status of secured creditors under the waterfall mechanism, preserving the priority of financial and operational creditors.
In liquidation proceedings, the Act curtails the independent, quasi-judicial powers of the liquidator to admit, reject, or determine the valuation of claims, transferring substantial oversight directly to the Committee of Creditors. The liquidator must now act under the direct supervision of the committee, which holds the power to appoint or remove the liquidator and direct the liquidation process.
Furthermore, the Act mandates the National Company Law Tribunal to pass a liquidation order within 30 days from application and requires liquidation proceedings to be completed within 180 days, extendable by a maximum of 90 days. Additionally, the newly introduced Creditor-Initiated Insolvency Resolution Process permits specified financial institutions to commence out-of-court insolvency proceedings with 51% creditor consent by value, keeping the debtor in possession of the corporate entity. To ensure administrative precision, the Act establishes clear statutory definitions for service providers, avoidance transactions, and fraudulent or wrongful trading.
Redefining Asset Valuation: The Coordinating Valuer Framework under Regulation 35
On February 25, 2026, the Insolvency and Bankruptcy Board of India notified amendments to the Corporate Insolvency Resolution Process Regulations, completely reforming the valuation framework. Regulation 2(1)(hb) now defines fair value as the estimated realizable value of the corporate debtor or its assets on the insolvency commencement date between a willing buyer and a willing seller in an arm’s length transaction.
Crucially, this estimated value must be computed by accounting for the total realizable value of all tangible and intangible assets together with their underlying synergies, shifting focus toward enterprise-level worth. Under the revised Regulation 27(1) and Regulation 35(1), the resolution professional must appoint two sets of registered valuers within seven days of their appointment, and no later than forty-seven days from the insolvency commencement date, to determine the fair and liquidation values.
Each set consists of one registered valuer for each asset class of the debtor, with one designated as the coordinating valuer in consultation with the Committee of Creditors. While individual asset valuers conduct physical verifications and submit reports, the coordinating valuer computes the comprehensive fair value of the corporate debtor as a whole. To ensure transparency, the resolution professional must facilitate a pre-valuation meeting where the valuers explain their proposed methodology to the committee. Registered valuers must prepare their reports and maintain documentation in standardized formats under valuation standards formally notified by the Board, which designated the International Valuation Standards on April 1, 2026.
The final fair value is derived from the average of the two closest estimates submitted by the coordinating valuers, while the final liquidation value is the average of the two closest estimates from the registered valuers in each asset class. If these estimates are significantly different, meaning a difference of 25% or more, or if the committee of creditors requests in writing, a third set of registered valuers may be appointed, with the final value derived from the average of the two closest estimates out of the three sets.
The MSME Valuation Proviso under the May 2026 Second Amendment
To optimize the balance between administrative costs and procedural oversight, the Insolvency and Bankruptcy Board of India notified the Corporate Insolvency Resolution Process (Second Amendment) Regulations on May 19, 2026, which took effect on May 20, 2026. This amendment inserts a critical proviso under Regulation 27(1) specifying that where the corporate debtor is classified as a Micro, Small, or Medium Enterprise under Section 7(1) of the Micro, Small and Medium Enterprises Development Act, 2006, the resolution professional shall appoint only one set of registered valuers to determine the fair value and liquidation value.
This single-set default rule drastically lowers compliance and professional expenses for distressed smaller enterprises. However, the committee of creditors retains the power to override this default and appoint two sets of registered valuers, provided they record their justifications for doing so in writing.
Sector-Specific Overhaul: Real Estate Project Insolvency and Homebuyer Safeguards
Real estate insolvency presents distinct challenges because homebuyers prioritize project completion and delivery over financial recovery, a critical issue given that approximately 4.12 lakh residential units valued at INR 4.08 lakh crore remain stalled across India. Pursuant to the directions of the Supreme Court in the case of Mansi Brar Fernandes versus Shubha Sharma, 2025 INSC 1110 on September 12, 2025, the Insolvency and Bankruptcy Board of India received a comprehensive report on April 7, 2026, delivering 155 recommendations to align the Code with the Real Estate (Regulation and Development) Act, 2016.
These recommendations have driven several sector-specific regulatory updates. Under Regulation 4D, the resolution professional must operate a separate bank account for each individual real estate project to prevent fund diversion. Regulation 4E empowers the resolution professional, upon receiving at least a 66% voting approval from the committee of creditors, to hand over physical possession of a unit and facilitate its registration to an allottee who has requested the handover and performed their contractual financial obligations.
To prevent the disenfranchisement of homebuyers who fail to submit formal claims, Regulation 36(2)(ja) mandates that the Information Memorandum must include details of all allottees whose claims are reflected in the corporate debtor’s books or in Real Estate Regulatory Authority records, even if they have not formally submitted claims. Crucially, Regulation 38A requires that the approved resolution plan explicitly provide for the treatment and protection of these non-claiming allottees. To evaluate project viability, the resolution professional must submit a comprehensive report detailing the status of development rights and permissions to the Adjudicating Authority within 60 days of the insolvency commencement date under Regulation 30C.
Additionally, the committee of creditors may relax eligibility criteria, refundable deposit conditions, and performance security requirements for homebuyers’ associations representing at least 10% or 100 creditors in that class. To further facilitate successful resolutions, Regulation 31A waives the standard regulatory fee of 0.25% of the realizable value when the approved resolution plan is submitted by an association or group of allottees.
Procedural Rigor, Limitation Chronology, and Evidentiary Standards in CIRP
To prevent frivolous litigation, the regulations enforce strict evidentiary standards at the pre-admission stage. Under Regulation 2A, a financial creditor filing a Section 7 application must furnish clear proof of default, consisting of either certified entries under the Bankers’ Books Evidence Act, 1819, or a non-appealable judicial order adjudicating the debt. For operational creditors filing under Section 9, Regulation 2B mandates the submission of relevant extracts of Form GSTR-1 and Form GSTR-3B filed under Goods and Services Tax laws, alongside copies of e-way bills where applicable, to eliminate fabricated operational claims.
To enforce strict compliance with the Limitation Act, 1963, Regulation 2D requires both financial and operational creditors to submit a detailed chronology of the debt and default, explicitly detailing the due date, date of default, part payments, last acknowledgment of debt, and the specific applicable limitation period. To preserve process independence, Regulation 3(1) establishes that an insolvency professional is ineligible for appointment if they or any partner of their insolvency professional entity have been associated with a consulting or legal firm that had transactions with the corporate debtor amounting to 5% or more of its gross turnover in the preceding three financial years.
Upon appointment, Regulation 3A requires the interim or resolution professional to take custody and control of the corporate debtor’s records and assets, preparing a detailed custody list signed by the parties present and witnessed by at least two independent individuals. Any change in the name or registered address of the corporate debtor in the two years preceding the insolvency commencement date must be disclosed in all communications under Regulation 4B, and the interim resolution professional must maintain administrative continuity by opening a dedicated process email account under Regulation 4C, handing over its access credentials to any successor professional.
Operational Timeline, Claim Verification, and Adjudication Protocols
The insolvency resolution process operates within a strict timeline, designed to complete within 180 days, extendable up to 330 days in specified circumstances. Under Regulation 6(1), the interim resolution professional must publish a public announcement in Form A within three days of their appointment, inviting claims from creditors. While claims must ordinarily be submitted within 14 days of appointment, Regulation 12(1) allows creditors to submit claims with proof up to the date of the request for resolution plans or ninety days from the insolvency commencement date, whichever is later, provided they supply reasons for the delay. The resolution professional must verify each claim within seven days of receipt under Regulation 13(1), recording written reasons for any omission.
Furthermore, Regulation 13(1B) establishes a late-claim window for claims received after the ninety-day period but up to seven days before the committee votes on the resolution plan or liquidation; the professional must verify and categorize these claims, notify the creditor of the decision within seven days, and submit acceptable claims to both the committee and the Adjudicating Authority for formal condonation of delay and adjudication. Claims denominated in foreign currency are valued in Indian currency at the official reference exchange rate published by the Reserve Bank of India on the insolvency commencement date under Regulation 15.
To identify and reverse transactions that deplete assets, the resolution professional must form an independent opinion on preferential, undervalued, extortionate credit, or fraudulent transactions by the 75th day, make a formal determination by the 115th day, and apply to the Adjudicating Authority for relief by the 130th day under Regulation 35A. Under Regulation 35A(3A), a copy of this avoidance application must be forwarded to the prospective resolution applicants to ensure they can factor the pending litigation into their resolution plans.
Creditor Governance: Committee Constitution, Voting, and Financial Controls
If the corporate debtor has no financial debt or all financial creditors are related parties, Regulation 16 mandates the constitution of a committee comprising the eighteen largest operational creditors by value, alongside one elected representative for workmen and one for employees. For a class of creditors, such as homebuyers, the interim resolution professional must identify three insolvency professionals to act as the Authorised Representative, with the final selection based on the choice of the highest number of creditors in that class. While the formal appointment application is pending, the selected professional acts as an interim representative to attend committee meetings and represent the class.
Under Regulation 16A(8), the representative is entitled to a fixed fee per meeting ranging from INR 30,000 to INR 50,000 depending on the size of the class, while additional meetings of the class of creditors are compensated at a rate of INR 10,000 to INR 15,000. Where a class of creditors exceeds one thousand, Regulation 16C permits the appointment of up to five independent facilitators to aid communication, with each facilitator’s fee capped at 20% of the representative’s fee. To maintain administrative momentum, the resolution professional must convene at least one committee meeting every quarter, ensuring the interval between consecutive meetings does not exceed thirty days unless extended by the committee, or upon a request by members representing at least 33% of the voting rights.
Committee meetings are called by giving not less than five days’ notice in writing, which the committee may reduce to twenty-four hours, or forty-eight hours if an authorized representative is present. The quorum is met if members representing at least 33% of the voting rights are present under Regulation 22(1). To maintain tight financial controls, Regulation 31B requires the resolution professional to present the operational status of the debtor and seek formal approval for all expenditures comprising the insolvency resolution process costs.
Furthermore, any proposal to withdraw the insolvency application under Section 12A must be made in Form FA, accompanied by a bank guarantee covering estimated expenses, and approved by the committee with a 90% voting share under Regulation 30A. Committee members may also propose a comprehensive audit of the corporate debtor under Regulation 30B, which must be approved by the committee and conducted by an insolvency professional.
Resolution Plan Adjudication and Post-Approval Compliance Mechanisms
The culmination of the resolution process requires the evaluation and approval of a resolution plan under Section 30 of the Code. Under Regulation 38(1), payments under the plan must prioritize operational creditors over financial creditors, and dissenting financial creditors over assenting financial creditors. If the plan provides for payment in stages, dissenting financial creditors must be paid at least pro-rata and in priority in each stage. The plan must demonstrate how it addresses the cause of corporate default, prove its viability, and show that the resolution applicant possesses the capability for effective implementation under Regulation 38(3).
Additionally, every plan must include a statement of beneficial-ownership covering all natural persons who ultimately own or control the applicant, alongside an affidavit confirming eligibility under the Section 32A immunity provisions. The committee must evaluate and vote on all compliant plans simultaneously under Regulation 39(3). The plan receiving the highest percentage of votes, provided it meets the 66% majority threshold, is approved, with tie-breaker formulas resolving equal votes and secondary voting applied if no plan initially secures the requisite majority.
Once approved, the resolution professional must submit the plan to the Adjudicating Authority at least fifteen days before the completion of the process, accompanied by a compliance certificate in Form H and evidence of the performance security. To oversee implementation, the committee must set up a Monitoring Committee under Regulation 38(4), which is charged with submitting detailed quarterly reports regarding the implementation status of the plan.
If the committee decides to liquidate the corporate debtor under Section 33, it must record its consideration of factors like a non-operational status, obsolete technology, or lack of assets under Regulation 40D, while approving a contribution plan for liquidation costs under Regulation 39B. Finally, to ensure complete regulatory oversight, the resolution professional must file all electronic CP forms on the Board’s platform within stipulated monthly timelines under Regulation 40B, subject to a late fee of INR 500 per form for each calendar month of delay.
Conclusion
The legislative amendments of 2026 and the subsequent regulatory updates introduced by the Insolvency and Bankruptcy Board of India represent a robust effort to refine the corporate insolvency process. By shifting from a purely asset-by-asset valuation to an enterprise-level, synergy-inclusive model and introducing the coordinating valuer framework, the regulatory regime enhances both precision and economic realism.
The implementation of specialized, project-centric frameworks for real estate insolvencies and the cost-effective single-set valuer rules for small and medium enterprises demonstrate a highly tailored approach to industry-specific distress. Concurrently, the introduction of stricter evidentiary and timeline standards ensures that the insolvency framework maintains its core objectives of timely resolution, value maximization, and structural transparency. These consolidated reforms ultimately fortify the predictability of the credit market in India, balancing the commercial wisdom of creditors with essential consumer and corporate safeguards.
The latest CIRP reforms must be viewed alongside the judiciary’s approach to creditor autonomy, examined in detail in Commercial Wisdom of CoC under IBC: 2026 Legal Analysis.
