India’s Insolvency Reforms Under Scrutiny as Creditor-Led Process Raises Questions

The current assessment of the corporate insolvency system in India happens through two processes which involve experts and stakeholders who examine the effects of proposed changes on future insolvency cases. The Insolvency and Bankruptcy Code (Amendment) Bill 2025 introduces a new system which establishes the Creditor-Initiated Insolvency Resolution Process (CIIRP) as its primary operational element.

The CIIRP system enables specific financial creditors to initiate out-of-court insolvency proceedings after a default happens, which the National Company Law Tribunal (NCLT) supervises through essential steps that include moratorium establishment and resolution plan approval. The Corporate Insolvency Resolution Process (CIRP) which requires judicial admission through Tribunal procedures has developed from existing practices.

Supporters of the new approach argue that allowing creditors to trigger insolvency more directly can speed up resolution and reduce the backlog of cases facing both the NCLT and its appellate body, the National Company Law Appellate Tribunal (NCLAT). The existing system currently operates with many open cases which exceed their expected resolution time limits according to insolvency experts.

Critics express their view that CIIRP implementation will give excessive authority to creditors because it fails to establish sufficient safeguards which protect debtors and other affected parties. The early stages of the process remain outside court control which creates a hindrance for debtors who need to present their restructuring proposals and negotiate their agreements before the actual insolvency process begins.

The NCLT and NCLAT face another controversial issue because of their actual handling practices regarding court procedure delays. The existing system permits tribunals to face operational challenges which result in case outcomes taking longer than allowed by legal requirements. Critics argue that the delays continuing from today will not disappear until the system acquires more effective facilities together with better enforcement procedures and critical schedule requirements. The CIIRP implementation will not solve timing problems according to critics because it will only shift the points where delays take place.

Experts require the CIIRP to establish proper control mechanisms which need to show complete responsibility for its operations. The process will favor creditors when it operates without such controls, which will result in debt restructuring that lacks complete transparency, thus damaging stakeholder trust in the insolvency system who want fair solutions and complete asset recovery.

The Indian corporate resolution framework modernization process continues because the insolvency reform agenda remains unresolved. The government and regulators are reviewing feedback from experts, industry participants, and legal practitioners on how best to fine-tune the Code. The system aims to protect creditor rights while providing fast resolutions and delivering maximum value to all involved parties, which will foster business development and promote economic growth.