CIIRP: The Reform that Assumes the Problem is Already Solved

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CIIRP: The Reform that Assumes the Problem is Already Solved

I. Abstract

The Insolvency and Bankruptcy Code (Amendment) Bill, 2025¹ is one of the biggest legislative interventions in India’s insolvency framework since 2016. Its main innovation is the Creditor-Initiated Insolvency Resolution Process (CIIRP): a 150 day, out-of-court mechanism under the newly added Chapter IV-A, which allows specified financial creditors to initiate resolution without going to the National Company Law Tribunal. The promise is speed, a process that bypasses the NCLT at an early stage and delivers resolution before the tribunal’s structural hurdles impose their well known costs. This blog argues that the CIIRP is a well designed instrument built on a flawed premise. The hurdle it seeks to bypass has not been removed but it has been reinstated. Under Section 58H of the bill, any CIIRP that fails to submit an approved resolution plan within 195 days is essentially converted into a regular CIRP and ultimately referred to the NCLT. Benches that currently take 713 days to resolve an IBC case nationwide will treat each failed CIIRP as a new approval. The pipe has been extended upstream. The blockage remains where it was. Based on parliamentary committee analysis and the Economic Survey 2025-26, this blog argues that CIIRP is not the solution to India’s insolvency delay crisis but is a legislative assumption that the crisis is already solved.

II. Introduction

CIIRP, is precisely a reform designed to solve a problem that exists one step above the real one. It is the right answer to the wrong question. A 150 day out-of-court mechanism available only to notified financial institutions, allowing creditors to initiate insolvency without approaching the NCLT, provided 51% of that class of creditors consent². Crucially, the proposed initiation of CIIRP explicitly excludes any involvement of the NCLT at the stage of initiation. The process commences through a public announcement made by the resolution professional with the NCLT playing a supervisory role only at key stages including in case of dispute, for grant of moratorium and for approval of the resolution plan³. The logic is compelling on its face. As of March 2025, nearly 30,600 cases were pending before the NCLT, a backlog that could take close to a decade to resolve at the current pace of disposal⁴. The average CIRP duration has stretched to 713 days overall and 853 days for cases closed in FY25 which presents a deviation of more than 150 per cent from the legal limit which the Economic Survey 2025-26 flagged as the most serious challenge facing the insolvency regime today⁵. The problem is what happens when CIIRP fails.

III. The Conversion Issue

If no resolution plan is approved within the time duration, extendable once by 45 days with 66% CoC approval, the NCLT shall order conversion into CIRP⁶. This is the provision that reveals CIIRP’s structural limitation. Everything beyond that ceiling, every CIIRP that the creditors cannot resolve among themselves, every corporate debtor that contests the process, every case where the resolution professional’s conduct is challenged, every matter where no resolution applicant emerges that converts into a regular CIRP and joins the queue at the same NCLT bench that the CIIRP was specifically designed to avoid. The absence of adjudication at the application stage could be contested by a corporate debtor who might challenge the genuineness of the default or the conduct of the resolution professional during the CIIRP, leading to potential disputes over the validity of a creditor’s claim and further delays and the provision for automatic conversion of CIIRP to CIRP could itself become a new point of contention. In other words, it does not remove the NCLT from India’s insolvency pipeline. It adds a 195 day pre-stage before the pipeline begins. The bottleneck remains exactly where it was. The queue is now longer, not shorter and is because every failed CIIRP arrives at the NCLT as a fresh CIRP admission, carrying the accumulated procedural history of a process that has already consumed nearly seven months and produced nothing.

IV. The Structural Argument the Bill Misses

It is triggered at the same point as CIRP, after the debtor’s financial position has deteriorated to the point of formal insolvency which means the asset value erosion that the 150 day clock is designed to bracket has already begun before the process starts. The Economic Survey noted that prolonged delays in insolvency proceedings lead to erosion of enterprise value and weaken the broader financial system with extended resolution timelines resulting in asset depreciation, employee attrition, loss of customers to competitors and breakdown of supplier relationships. The UK and Singapore run specialised insolvency benches that ensure judicial focus and build expertise, enforce strict timelines, limit adjournments and deploy case managers to track progress, mechanisms that prevent procedural abuse and improve efficiency⁷. India’s Amendment Bill does none of this for the NCLT itself. It creates an alternative pathway that routes successful cases around the NCLT, the cases that least needed an alternative pathway while sending the difficult, contested and failed cases directly into the same tribunal that was already struggling with capacity.

V. What Reform Actually Requires

The Economic Survey⁸ stressed that sustaining the IBC’s gains will require not just procedural tweaks but a rapid scaling up of institutional capacity⁹. The MCA seeks the creation of at least 50 additional NCLT benches to restore time bound resolution¹⁰. These reforms address the bottleneck at its source. CIIRP addresses the symptom which is the NCLT’s role at the initiation stage but not the whole issue. It will help some creditors in some cases resolve some disputes faster. That is not nothing. But it will not reduce the 30,600 case backlog at the NCLT¹¹. It will not bring the national CIRP average below 713 days and it will not change what a creditor in Patna or Ranchi or Kolkata experiences when their CIIRP fails and their case joins the queue at the same two courtroom bench in Kolkata that was already managing 680 day timelines before the Amendment Bill was introduced. The IBC Amendment Bill of 2025 is a well intentioned reform of the process that precedes the tribunal. What India’s insolvency system needs is an equally serious reform of the tribunal itself. If the government is really serious about ensuring that the CIIRP progresses quickly, rather than merely delaying, it should consider three reforms.

A national bench-pooling protocol for converted CIRPs – When a CIIRP fails and is converted into a CIRP under Section 58H, it should not automatically go to the bench with jurisdiction, instead, a live NCLT caseload dashboard maintained by the IBBI should assign each converted CIIRP to the bench with the lowest pending IBC caseload nationwide at that time thereby completely eliminating regional bottlenecks and distributing the conversion load across the system rather than concentrating it on already overburdened benches¹².
A conversion penalty clock – The moment a CIIRP converts to CIRP, the statutory 330 day countdown should not restart from zero as it currently would. The 195 days already consumed in the out-of-court process should be counted against the NCLT’s timeline, giving the bench only the remaining 135 days to conclude resolution and creating a real institutional incentive to prioritise converted matters over fresh admissions¹³.
Creditor-side accountability through the CIIRP performance deposit – The financial creditor initiating the CIIRP will be required to deposit a time-bound performance deposit with the IBBI, which will be partially forfeited to the Creditor Compensation Fund if the process fails due to a default in the creditor-side process, thereby transforming the moratorium from a free scheduling facility into a cost impacting financial event like the same accountability that the IBC imposed on corporate debtors in 2016 but never in any form on the creditor initiating and controlling the process^14,15.,

¹IBC Amendment Bill 2025, (PRS Legislative Research), Available at: https://prsindia.org/billtrack/the-insolvency-and-bankruptcy-code-amendment-bill-2025
²Taxguru, ‘IBC 2.0 Reforms Accelerate Insolvency Resolution in India’ (December 15th 2025), Available at: https://taxguru.in/corporate-law/ibc-2-0-reforms-accelerate-insolvency-resolution-india.
³Vishrut Kansal, ‘From Resolution to Resilience: Building an Insolvency Risk Barometer for India’ (Oxford Business Law Blog, November 3rd 2025), Available at: https://blogs.law.ox.ac.uk/oblb/blog-post/2025/11/resolution-resilience-building-insolvency-risk-barometer-india
⁴Abhishek Swaroop and others, ‘Supreme Court Reaffirms Strict Adherence To Timelines Under The IBC’ (Saraf and Partners Law Offices, July 23rd 2025), Available at: https://sarafpartners.com/supreme-court-reaffirms-strict-adherence-to-timelines-under-the-ibc
⁵Supreme Court Reaffirms Strict Timeframe for IBC Appeals in A Rajendra v. Gonugunta Madhusudhan Rao’ (CaseMine, April 5th 2025), Available at: https://www.casemine.com/commentary/in/supreme-court-reaffirms-strict-timeframe-for-ibc-appeals-in-a-rajendra-v.-gonugunta-madhusudhan-rao
⁶TRT Editorial, ‘Proposed IBC Amendments Positive but Recovery Rates and Timelines Remain a Concern: ICRA’ (The realty Today, January 4th 2026), Available at: https://therealtytoday.com/news/regulatory/proposed-ibc-amendments-positive-but-recovery-rates-and-timelines-remain-a-concern-icra/
7Vasanth Rajasekaran and others, ‘10 Important Insolvency Judgments Of 2025’ (LiveLaw, December 24th 2025), Available at: 10 Important Insolvency Judgments Of 2025
⁸Ministry of Finance, Government of India, Economic Survey 2025-26, Department of Economic Affairs (January 2026), Available at: https://www.indiabudget.gov.in/economicsurvey/doc/echapter.pdf
⁹No Condonation Beyond 45 Days: Supreme Court Re-affirms Absolute Time-Bar under Section 61(2) IBC’ (CaseMine, May 8th 2025), Available at: https://www.casemine.com/commentary/in/no-condonation-beyond-45-days:-supreme-court-re-affirms-absolute-time-bar-under-section-61(2)-ibc/view
¹⁰Report of the Select Committee on the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (18th Lok Sabha, 17th December 2025), (a)2, Pg. No. 50, Available at: https://ibbi.gov.in/uploads/resources/2ce0f4a4a146d49fb96f4939aa4fbe25.pdf
¹¹Nimitt Dixit, ‘India’s Insolvency System Faces 10-Year Backlog as ₹15 Lakh Crore Sits Frozen’ (ET LegalWorld, December 8th 2025), Available at: India’s Insolvency System Faces 10-Year Backlog as ₹15 Lakh Crore Sits Frozen.
¹²Economic Survey 2025-26; IBBI Quarterly Newsletter, July–September 2025, Available at: https://ibbi.gov.in/uploads/whatsnew/452d899ae03283f1eb40b1bf7ee5f187.pdf
¹³No Condonation Beyond 45 Days: Supreme Court Re-affirms Absolute Time-Bar under Section 61(2) IBC’ (CaseMine, May 8th 2025), Available at: https://www.casemine.com/commentary/in/no-condonation-beyond-45-days:-supreme-court-re-affirms-absolute-time-bar-under-section-61(2)-ibc/view
¹⁴Companies Act 2006 (UK), Part 26A, Available at: https://www.legislation.gov.uk/ukpga/2006/46/part/26A
¹⁵Singapore IRDA insolvency creditor obligations 2018; Available at: https://sso.agc.gov.sg/Act/IRDA2018

CIIRP: The Reform that Assumes the Problem is Already Solved

Table of Contents

I. Abstract

II. Introduction

III. The Conversion Issue

IV. The Structural Argument the Bill Misses

V. What Reform Actually Requires

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