Finance Minister tables new bankruptcy bill

The Government of India has officially tabled the Insolvency and Bankruptcy Code (Amendment) Bill, 2026 in the Lok Sabha. The proposed legislation represents the most significant overhaul of India’s distressed asset framework since the code’s inception in 2016, aiming to slash resolution timelines and integrate artificial intelligence into the judicial process.

The bill arrives at a critical juncture as the National Company Law Tribunal (NCLT) faces a record backlog of over 25,000 cases, with the average resolution time stretching to 653 days—far beyond the original 330-day legal mandate.

1. The “Project Samadhan” AI Integration

The cornerstone of the 2026 Bill is the formal legal recognition of Project Samadhan, an AI-powered judicial assistant designed to automate the “administrative” phase of bankruptcy.

• Automated Admission: The bill proposes that for “clean” defaults (where debt is undisputed), the admission of a case into the Corporate Insolvency Resolution Process (CIRP) will be automated. If the AI verifies the default via the Information Utility (IU), the case is deemed admitted within 7 days, bypasssing the current 30-to-90-day manual hearing cycle.
• Document Verification: The AI will handle the high-volume task of verifying claims from thousands of creditors, a process that currently consumes months of a Resolution Professional’s (RP) time.
• Predictive Outcomes: A new “Digital Dashboard” will provide creditors with AI-generated recovery estimates based on historical benchmarks for similar industries and asset sizes.

2. Group Insolvency & Cross-Border Framework

For the first time, India is moving away from the “standalone” entity approach to address the reality of modern corporate conglomerates.

• Group Insolvency: The bill allows the NCLT to consolidate the bankruptcy proceedings of a parent company and its subsidiaries into a single consolidated process. This prevents the “value fragmentation” seen in cases like Videocon or Reliance Communications, where different assets were sold piecemeal across different courts.
• Cross-Border Protocol: The bill adopts the UNCITRAL Model Law, allowing Indian courts to cooperate directly with foreign courts. This is designed to help Indian banks recover assets hidden or parked in overseas jurisdictions like the UK, Dubai, or Singapore.

3. Protection for Real Estate Allottees

Following years of litigation, the 2026 Bill introduces a “Project-Wise” insolvency model specifically for the real estate sector.

• Ring-Fencing Projects: If a developer fails on one specific housing project, the NCLT can now initiate insolvency only for that project, rather than dragging the entire company into bankruptcy. This ensures that “healthy” projects within the same company are not stalled.
• Homebuyer Rights: The bill reaffirms that homebuyers are Financial Creditors but introduces a “representative” model to prevent thousands of individual filings from paralyzing the Committee of Creditors (CoC).

4. Key Metrics & Efficiency Targets

The Ministry of Corporate Affairs (MCA) has set aggressive “Performance Benchmarks” that the NCLT must meet under the new law:

5. Industry Reaction: “Resolution, Not Liquidation”

The Insolvency and Bankruptcy Board of India (IBBI) has welcomed the bill, noting that it shifts the focus back to “saving the firm” rather than selling it for scrap.

“The 2026 Bill is about surgical precision,” noted a senior MCA official. “By using AI to handle the ‘paperwork’ and Group Insolvency to handle the ‘complexity,’ we are ensuring that capital is unblocked and returned to the economy in months, not years.”

However, some legal experts caution that “automated admission” may face constitutional challenges regarding the Right to be Heard, which could lead to a fresh wave of litigation in the High Courts before the bill is fully implemented.