Insolvency Law Rewind 2025

Posted On - 29 January, 2026 • By - KM Team

Introduction

The Insolvency and Bankruptcy Code, 2016 (“IBC/Code”), now approaching its tenth anniversary, witnessed a year of profound judicial interventions and regulatory refinements. The developments in 2025 consist of more than merely amendments and judgments. Throughout the year, the IBC framework grappled with the delicate balance between creditor primacy, homebuyer protection and timely resolution, against the backdrop of increasingly complex corporate distress.

This rewind unpacks 2025’s pivotal developments in the IBC framework including National Company Law Tribunal (“NCLT”) delays, transformations in real estate insolvency and moratorium sanctity.

NCLT Delays and the Quest for Swift Justice

The Standing Committee on Finance, in its 28^th report titled ‘Review of Working of Insolvency and Bankruptcy Code and Emerging Issues’ presented on 2 December 2025, engaged with the serious and prominent IBC related concerns. These concerns involved issues relating to capacity constraints in the Tribunals, leading to prolonged delays and the dilution of the effectiveness of the Insolvency procedure. The Committee inter alia observed that:

The delays in insolvency resolution have been caused due to manpower shortages in the NCLTs, with the Ministry of Corporate Affairs stating that against a sanctioned strength of 63, only 58 members are currently in position.
The average time taken for closure of the Corporate Insolvency Resolution Process (“CIRP”) is 713 days, far exceeding the mandated 330-day timeline, causing significant delays that are affecting stakeholder confidence in the efficiency of the insolvency framework.
Delay in CIRP has significantly decreased the realisation value under a resolution plan. While creditors realise 170% of the liquidation value, only 32.8% of the total admitted claims are recovered.

Considering these concerns, the Committee has made various recommendations which include the establishment of additional NCLT benches, operationalisation of a centralised case management platform, expansion of competitive bidding through global outreach, etc.

The Supreme Court of India has consistently emphasised that timeliness is a foundational pillar of the IBC, requiring strict compliance with the statutory timelines as prescribed under Section 12 for completion of the CIRP. In this context, the Supreme Court has, in several decisions, reiterated its concern over delays in insolvency proceedings.

In the recent case of Mohammed Enterprises (Tanzania) Ltd. v. Farooq Ali Khan & Ors.¹, the Apex Court took note of the delay in the insolvency process by observing that the CIRP had commenced more than six years ago on 26 October 2018, while the resolution plan had already been approved as early as in 2020 and yet CIRP was not concluded. The Court placed reliance on its decision in the case of State Bank of India and Ors. v. Consortium of Mr. Murai Lal Jalan & Ors.² and reiterated that it has, on multiple occasions, highlighted the imperativeness of bringing CIRP proceedings to a timely conclusion and that an unjustified interference with proceedings initiated under the IBC, breaches the discipline that the law expects.

Navigating Complexity in 2025

The Bhushan Power Saga:

In early May 2025, the Supreme Court delivered a ruling in Kalyani Transco v. Bhushan Power and Steel Ltd.³, where it set aside JSW Steel Ltd.’s resolution plan for Bhushan Power & Steel Ltd. (“BPSL”) originally approved in 2018. The Court held that JSW’s resolution plan was not in conformity with the IBC and invoked Section 33(1) of the IBC and Article 142 of the Constitution of India, thereby directing NCLT to initiate liquidation proceedings against BPSL.

However, in July 2025, the legal trajectory shifted. The Supreme Court stayed the liquidation direction and recalled its May 2025 order. Thereafter, upon rehearing the matter, a three-judge bench passed a detailed judgment⁴ in September 2025 reinstating JSW Steel’s resolution plan. The Court held that delays in implementation were not attributable to the CoC or JSW and reaffirmed that once a resolution plan is duly approved, reopening claims outside its scope would frustrate the IBC’s objectives. This decision of the Supreme Court reinforces the sanctity of the commercial wisdom of the Committee of Creditors (“CoC”) and the rescue objective of the IBC.

Timelines on CCI Approval – Hindustan National Glass & Industries Ltd.

In 2025, the interaction between insolvency approvals and merger control under the proviso to Section 31(4) of the IBC came under close scrutiny. In the case of Independent Sugar Corporation Ltd. v. Girish Sriram Juneja and Ors.⁵, the Supreme Court held that under the proviso to Section 31(4) of the IBC, a prior approval from the Competition Commission of India (“CCI”) is required for consideration of a resolution plan by the CoC involving mergers or acquisitions. The Court clarified that CCI clearance cannot be treated as a post-facto or procedural formality and must precede the CoC’s decision-making, thereby significantly altering the sequencing of resolution approvals.

To counter the challenges involved in this case, the Government, as part of the IBC (Amendment) Bill, 2025 (“IBC Amendment Bill 2025”), proposes to introduce a change that CCI clearance shall be obtained after the CoC has approved the resolution plan, but before the resolution plan is submitted to the Adjudicating Authority. This proposed change preserves competition law compliance while preventing delays or disruption in the insolvency timeline.

Scope of judicial review over resolution plans – Dewan Housing Finance Corporation Limited

In Piramal Capital and Housing Finance Limited v. 63 Moons Technologies Limited & Ors.⁶, the Supreme Court reaffirmed the limited scope of judicial review under the IBC. The Supreme Court upheld the NCLT’s approval of the resolution plan in the Dewan Housing Finance Corporation Limited (“DHFL”) insolvency and emphasised that the NCLT and the National Company Law Appellate Tribunal (“NCLAT”) must confine their review to the narrow statutory criteria, particularly affirming the compliance with Section 30(2) of the IBC, and cannot revisit the commercial merits of the CoC’s decision.

The Court upheld the provision in the resolution plan that allowed the successful resolution applicant to appropriate recoveries arising from fraudulent and wrongful trading actions under Section 66 of the IBC, while simultaneously directing that recoveries from avoidance proceedings relating to preferential, undervalued, and extortionate transactions would accrue to the benefit of the CoC. It further held that the erstwhile directors of DHFL, whose board had been superseded by the Reserve Bank of India (“RBI”) and who were deemed to have vacated office, had no right to attend CoC meetings or participate in the CIRP or make any claim to receive a copy of the proposed resolution plans submitted during the CIRP. However, once the Resolution Plan is approved by the NCLT, the Court held that the erstwhile directors would be entitled to get certified copy of the same as it would become a “public document”.

Real Estate Insolvency

The real estate sector’s intersection with insolvency law witnessed significant judicial scrutiny in 2025. Courts dealt with fundamental questions such as:

When does a homebuyer’s claim mature into default?
Can Real Estate (Regulation and Development) Act, 2016 (“RERA”) remedies and IBC proceedings co-exist?
What constitutes a genuine residential need versus speculative investment?

Some of the important decisions in this regard are encapsulated below.

The Speculative Investor Test – Mansi Brar Fernandes Case

The Supreme Court in Mansi Brar Fernandes v. Shubha Sharma & Anr.⁷ laid down decisive parameters to distinguish between genuine homebuyers from speculative investors in real estate insolvency proceedings. The case arose from appeals against NCLAT orders that had set aside the admission of Section 7 petitions for initiation of CIRP filed by individual allottees on the ground that their agreements with real estate developers were structured as financial investments with assured returns and buy-back clauses, rather than a normal purchase agreement for possession. The Supreme Court highlighted that investors who enter real estate projects primarily for profit, particularly through assured return schemes cannot invoke CIRP as financial creditors under Section 7 of the IBC.

Emphasising the legislative intent behind recognising homebuyers as financial creditors, the Supreme Court reiterated that the IBC seeks to safeguard the fundamental right to shelter of genuine homebuyers who invest their life savings, and not commercial investors who use insolvency as a recovery mechanism. The judgment established the following indicative factors to identify speculative investors: (i) the nature of the agreement; (ii) assured returns or buyback clauses in the agreement; (iii) stage of project at the time of investment; (iv) existence of alternative arrangement in lieu of possession; and (v) number of units purchased.

The ruling reaffirmed the principles laid down in Pioneer Urban Land & Infrastructure Ltd.⁸ and significantly narrowed the scope for speculative insolvency filings, thereby reinforcing the need to protect the genuine homebuyers.

Homebuyer Rights Crystallised – The Amit Nehra Mandate

In Amit Nehra & Anr. v. Pawan Kumar Garg & Ors.⁹,the Supreme Court delivered a landmark judgment affirming the rights of bona fide homebuyers in an insolvency procedure, holding that homebuyers whose claims have been filed, verified, and admitted by the Resolution Professional (“RP”) cannot subsequently be denied possession on technical grounds. The appellants, who had booked an apartment and paid nearly the entire sale consideration, were treated by both the NCLT and the NCLAT as “belated claimants” based on the date on which they filled their claim and thereby entitled only to a 50% refund under the approved resolution plan. The Supreme Court set aside these decisions, holding that once a homebuyer’s claim has been verified and admitted by the RP and included their names in the list of financial creditors, it cannot be disregarded or reduced to a belated/refund-only category merely on procedural grounds.

Reverse CIRP plea for M/s Supertech Realtors Private Limited

The reverse CIRP mechanism allows real estate developers (promoters) and/or creditors to infuse funds and complete stalled projects without undergoing a full-fledged CIRP. In Ram Kishor Arora (Director) v. Bank of Maharashtra & Anr.¹⁰, the NCLAT reaffirmed that reverse CIRP is permissible, but it is dependent on case‑specific conditions.

Drawing a contrast with earlier precedents such as Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Pvt. Ltd., where lenders and financial institutions had consented to a promoter‑led funding arrangement, the NCLT emphasised that reverse CIRP cannot be invoked where the financial creditor initiating the CIRP and the consortium of lenders have declined to accept the promoter’s ‘One Time Settlement’ offer and project‑completion proposal, and the homebuyer constituency itself is divided. Thus, in the present case, the NCLAT upheld the order of NCLT for initiation of CIRP and dismissal of appeal.

Co-existence of RERA Remedies and IBC Proceedings: Homebuyers Retain Financial Creditor Status

The Supreme Court upheld the decision of the NCLT and NCLAT¹¹ in Shailendra Agarwal v. Asit Upadhyaya & Ors.¹² for admission of a Section 7 IBC application by homebuyers against the real estate developer, NHA Infrabuild Private Limited. Despite extensive prior recourse to Uttar Pradesh Real Estate Regulatory Authority, the Court emphasised that default in handing over possession and refund remained continuous and above the statutory threshold.

The core legal issue was whether homebuyers who had obtained recovery certificates or decrees under the RERA framework ceased to be “allottees” and “financial creditors” under Section 5(8)(f) of the IBC, and whether such homebuyers having pursued RERA remedies, barred or have undermined their right to invoke remedies under the IBC. Rejecting the corporate debtor’s reliance on earlier NCLAT precedent, the Court held that even decree holders under RERA continued to remain financial creditors in the homebuyer class and are counted for the Section 7(1) threshold. Placing reliance on the decision Pioneer Urban, the Court reiterated that RERA and IBC are complementary to each other, where RERA provides project-specific and individual remedies and IBC offers an in rem, collective insolvency mechanism that can still be invoked by homebuyers notwithstanding parallel or prior RERA proceedings.

Reinforcing Discipline in the Insolvency Framework

The Moratorium Sanctity: Shield cannot be misused

In Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.¹³, the Supreme Court examined whether the interim moratorium under Section 96 of the IBC for personal guarantors bars execution of consumer protection penalties. The Court held that regulatory penalties imposed for consumer protection violations are not “debts” within the IBC framework and do not attract moratorium protection, ensuring accountability for unfair trade practices persists despite insolvency proceedings.

In line with this reasoning, the IBC Amendment Bill 2025 refines the personal insolvency framework and excludes personal guarantors of corporate debtors from claiming interim moratorium protection. By removing this shield, the amendment reduces the scope for personal guarantors to rely on Section 96 to stall enforcement of consumer‑protection penalties and similar statutory sanctions.

The Clean Slate Doctrine Reinforced: M/s. Tehri Iron and Steel Casting Ltd.

In Vaibhav Goel & Anr. v. Deputy Commissioner of Income Tax & Anr.¹⁴, the Supreme Court reaffirmed the “fresh slate” doctrine which protects the successful resolution applicants. Relying on Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. and Ors., the Supreme Court held that once a resolution plan is approved, even the statutory dues of the Income Tax Department cannot be enforced post-approval.

Drawing from the Ghanashyam Mishra case and now Vaibhav Goel case, the IBC Amendment Bill, 2025 proposes to insert a Section 31(6) to codify that claims not recognised or provided for in the approved plan cannot be enforced subsequently, thereby granting the successful resolution applicant a legislatively entrenched ‘clean slate’.

Amendments and Regulatory Evolution

Amendments to CIRP Regulations

In February 2025, the Insolvency and Bankruptcy Board of India (“IBBI”) notified amendments to the Insolvency Resolution Process for Corporate Persons Regulations, 2016 (“CIRP Regulations”). These amendments aimed at streamlining CIRP proceedings, with particular emphasis on real estate projects. The amendments significantly strengthened the procedural position of homebuyers by addressing long-standing issues relating to claim recognition, information asymmetry and participation in the resolution process.

Subsequently, the CIRP Regulations were further amended by IBBI to strengthen transparency and stakeholder protections in CIRP. They inter alia (i) required the presentation of all resolution plans including non-compliant ones, to the CoC with reasons for non-compliance, (ii) introduced priority treatment for dissenting financial creditors in staggered payments, (iii) introduced disclosure requirements in the Information Memorandum regarding avoidance transactions and fraudulent/wrongful trading, and (iv) mandated beneficial ownership disclosures and eligibility affidavits in resolution plans.

The IBC Amendment Bill, 2025: Comprehensive Overhaul

The IBBI’s discussion paper released on 4 February 2025, titled “Streamlining Processes under the Code: Reforms for Enhanced Efficiency and Outcomes,” proposed fundamental reforms to the corporate insolvency resolution framework. The paper addressed concerns regarding dual-stage approval processes and suggested streamlined procedures to reduce delays without compromising stakeholder protections.

Building on these deliberations, on 12 August 2025, the IBC (Amendment) Bill, 2025 was introduced in the Lok Sabha, representing the most comprehensive legislative reform to the Code since its enactment. The Bill proposes reforms to ensure that Financial Creditor-led insolvency applications must be admitted promptly once default is established, supported by information utility records, reducing the average backlog of cases that has historically eroded creditor value.

Among its other key features, the Bill introduces a new Creditor‑Initiated Insolvency Resolution Process (CIIRP) that allows certain financial creditors to initiate restructuring through an out‑of‑court mechanism designed for faster, more cost‑effective turnaround with minimal business disruption. It also proposes a group insolvency framework for co-ordinated resolution within corporate groups, and a cross‑border insolvency framework aligned with international norms to facilitate recovery of assets and creditor enforcement in multinational contexts.

The Road Ahead

The year 2025 has showcased remarkable judicial sophistication in navigating complex and sector-specific issues, ranging from distinguishing speculative investors from genuine homebuyers, to mandating CCI approvals for combination resolutions, to protecting verified homebuyer claims within resolution plans. At the same time, legislative reforms through the IBC Amendment Bill 2025 promise to address long-standing systemic delays and procedural lacunae, offering a statutory framework that codifies key judicial principles such as the “clean slate” doctrine and creditor primacy. Yet significant challenges remain with respect to exceeded statutory timelines, manpower constraints at NCLT benches, and exposed limits of procedural efficiency.

Looking forward to 2026 and beyond, the success of the IBC will hinge on translating regulatory and judicial wisdom into operational reality. It is hoped that the IBC Amendment Bill is passed and implemented in the right spirit. Further, steps must be taken to ensure complete staffing and capacity-building at NCLT benches, and operationalisation of integrated digital platforms. These reforms will have a great impact on India’s insolvency regime, especially its ability to deliver swift, fair, and economically efficient resolutions, thus strengthening India’s credibility as a robust and investor-friendly jurisdiction.

The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident, or any other cause.