The shift from old scattered insolvency statutes to Insolvency Bankruptcy Code 2016 was celebrated for the paradigm shift from Debtor-in-Possession to Creditor-in-Control model. IBC has been influenced by the United Kingdom’s creditor-in-control model. However, after about a decade of implementation, the control often feels secondary to delay. The average time for resolution stretches over 600 days, this might also be attributed to judicial bottlenecks at the admission stage. Through the IBC (Amendment) Bill 2025 an attempt for debottlenecking the admission process by proposing a fundamental structural pivot the Creditor-Initiated Insolvency Resolution Process (CIIRP). This new proposed framework attempts to take a departure from the court-heavy admission process towards an out-of-court initiation mechanism. This attempts to prioritize speed and commercial wisdom over procedural litigation.
The primary bottleneck in the current CIRP regime is at the "admission stage.” Even with the clear-cut default under section 7 of IBC can be delayed admission for months before getting admitted. This could be attributed to judicial discretion (the Vidarbha Effect), procedural and dilatory tactics by debtors, administrative hurdles, etc. This bottleneck can be bypassed by the introduction of CIIRP as it removes the mandate of judicial order for commencement of the resolution process. In CIIRP the process begins with public announcement by a Resolution Professional (RP) once a threshold of “notified classes” of financial creditors, holding at least 51% of the value of the debt, gives their consent. This out-of-court commencement ensures that the resolution process starts immediately upon the recognition of distress, instead of waiting for judicial order.
In the current CIRP model at its initiation a RP along with Committee of Creditor replaces the existing management. While the proposed CIIRP adopts hybrid “Debtor-in-Possession” with creditor oversight. In CIIRP, the Board of Directors remains in control of daily operation but under the supervision of RP. The RP does not take over the day-to-day operation of the entity, instead acting as a strategic supervisor and gatekeeper. RP also has veto power over any decision that could prejudice creditor interests or dissipate assets. This ensures the continuity of business and prevents immediate value erosion.
CIIRP is introduced for ensuring velocity with a strict 150 day completion window which may be extended by 45 days. To maintain speedy resolution the bill has introduced a unique supervisory role of NCLT rather than a participatory one. Unlike automatic moratorium, in CIIRP the RP has to proactively apply to the NCLT to seek a moratorium if needed. Furthermore the framework has provided a safety-valve for the corporate debtor enabling him to challenge the initiation within 30 days. To ensure that the corporate debtor does not remain in a perpetual limbo, if the resolution fails to materialize within the 150-day limit the CIIRP automatically converts to CIRP.
The CIIRP allows the debtor to stay in possession while giving creditors the power to initiate the process without judicial delay, the 2025 Amendment Bill recognizes that the NCLT should be a forum for adjudication rather than an administrative gatekeeper. If successfully implemented, CIIRP will transition the Indian insolvency ecosystem from a litigious battleground to space for alternative debt resolution, time-bound resolution.