When the Insolvency and Bankruptcy Code (“IBC”) was enacted in 2016, it was hailed as the most consequential change to Indian corporate law in a generation. A decade in, the Code has delivered on much of its promise — and now, the most substantial overhaul since enactment has arrived. If you have receivables, loans, or any contractual exposure to an Indian counterparty, the next few minutes will reshape your understanding of how the Indian insolvency framework operates going forward.
A Decade of Friction: What the IBC Got Wrong
Before understanding the Amendment, it is essential to understand the practical challenges that made reform necessary. Four categories of friction had accumulated over ten years of IBC practice.
Judicial Inconsistency on Admission
Different courts applied different standards when deciding whether to admit an insolvency case. Some judges admitted cases the moment a creditor proved default however, others looked beyond the default to consider the company’s broader financial health. The outcome of your case depended more on which bench you appeared before than on the merits of your claim.
Withdrawal Abuses by Promoters
Original owners would allow the insolvency process to begin, wait for creditors to invest time and money, then at the last moment offer to settle and withdraw — effectively using the threat of insolvency as a pressure tactic to force creditors into accepting less money than they were actually owed or buy time, rather than genuinely resolving financial distress.
Group Insolvency Gaps
When an entire business group collapsed, the IBC had no mechanism to treat it as a single interconnected problem. Each company had to be pushed through its own separate insolvency process before a different bench, making coordinated resolution practically impossible and allowing deeply intertwined assets and liabilities to be dealt with in complete isolation.
Absence of Cross-Border Architecture
If an Indian company had assets abroad, or a foreign company owed money to Indian creditors, the IBC had virtually no tools to reach across borders — no framework for court cooperation, no mechanism to freeze overseas assets, and no system for recognising foreign insolvency proceedings in India.
Three Supreme Court Decisions the Amendment Directly Fixes
The Amendment Act responds to a decade of practitioner feedback and addresses specific judicial precedents that had cast serious doubt on the reliability and predictability of the IBC framework.
Vidarbha Industries Power Ltd. v. Axis Bank Ltd. (2022) 8 SCC 352
The Supreme Court held that the NCLT had discretionary power to admit an insolvency application even after a financial creditor proved default — a significant departure from the settled position that the NCLT’s role was restricted to checking the existence of debt and default. A creditor could walk in with clear proof of non-payment and the judge could still refuse admission. The Amendment restores mandatory admission: once default is proved, the court must admit the case.
State Tax Officer v. Rainbow Papers Ltd. (2022) SCC OnLine SC 1162
The IBC was deliberately designed with a priority waterfall placing government dues low in the queue, behind secured creditors, workers, and unsecured financial creditors. Rainbow Papers disregarded this waterfall, effectively allowing the government to jump the queue — alarming foreign creditors and resolution applicants. The Amendment legislatively extinguishes this anomaly by excluding statutory charges from the definition of “security interest.”
India Resurgence ARC Pvt. Ltd. v. Amit Metaliks Ltd. (2020) 8 SCC 5316 [2] Supra [3] Supra [4] Civil Appeal No. 3395 of 2020.
The Court held that dissenting financial creditors are entitled only to the portion of liquidation value allocated to their class by the CoC — meaning a creditor holding valuable security could be forced to accept a much smaller payment simply because the majority decided that was fair. The Amendment now provides that a dissenting financial creditor must receive not less than the lower of the liquidation value attributable to that creditor or its entitlement under the resolution plan applying the liquidation waterfall.
What the Amendment Act Introduces: Three New Frameworks
The IBC Amendment Act 2026 is the most substantial overhaul of the Code since its enactment. Beyond fixing existing problems, it introduces three entirely new frameworks that reshape the landscape for foreign creditors.
