A provision in the Insolvency and Bankruptcy Code (Amendments) Bill, 2025, tabled in Parliament, allows tribunals to first approve a company’s resolution plan and take up disagreements among creditors on distribution later, they said.

“This flexibility saves valuable time in the revival of the company, which otherwise could be lost to years of litigation,” said one of the persons quoted above. Insolvency and Bankruptcy Board of India (IBBI) will frame regulations on how the administrator of the bankrupt business can apply to a tribunal for separately handling implementation of the debt resolution plan and the distribution of proceeds, said the person.

The proposed IBBI regulations will also set out the conditions for the resolution professional to make an application to a tribunal in this regard. The order of the tribunal on the resolution plan as well as the subsequent decision on distribution of proceeds among creditors will be binding on all stakeholders, according to the amendment proposed to section 31 of IBC that deals with the approval of debt resolution schemes.

This change is expected to prevent instances like inter-creditor disputes delaying the full implementation of debt resolution plans of companies likeEssar Steel Ltd, Jaypee Infratech Ltd and Reliance Infratel Ltd, which ultimately sought the intervention of the Supreme Court, experts said.

The proposal is significant given the delays in debt resolution in many cases owing to litigation. As per official data, the1,258 companies that have been turned around under IBC till end of June 2025, on an average took 602 days to complete the process, excluding certain periods such as the pendency of a stay order, as decided by the courts.

The proposed amendment may be taken up during the winter session of parliament after review by a select committee.

Inter-creditor disputes on distribution often delay approvals before the National Company Law Tribunal (NCLT) and hence, allowing the tribunal to first clear the revival plan and take up distribution issues later removes a key bottleneck, said Anisha Jhunjhunwala, senior consultant-IBC at NPV Insolvency Professionals Pvt. Ltd. “This ensures implementation can begin on time, in line with the IBC’s objective of swift resolution,” she said.

“The Essar Steel India Ltd. vs. Satish Kumar Gupta & Ors. (2019) is a prime example, where differences between secured and operational creditors on distribution stalled the process until the Supreme Court stepped in,” said Jhunjhunwala, adding that in some of the large cases, creditor disputes over claim treatment have pushed back approvals. “The amendment directly targetsthesedelays.”

“One major bottleneck we have been facing in the case of bankrupt businesses is inter-creditor disputes,” said Soumitra Majumdar, partner at JSA Advocates andSolicitors. “In the case of distribution of proceeds of debt resolution and validity of inter-creditor arrangements, there have been disputes. The proposed amendments allow dissociating implementation of the resolution plan and the distribution of proceeds. The implementation need not be held back till all issues among creditors are sorted out. This is a major step in expeditious implementation of the resolution plan,” Majumdar added.

The proposal will plug a procedural gap, said Yogendra Aldak, executive partner at law firm Lakshmikumaran and Sridharan. The amendment proposed is a timely and targeted legislative response, he said, adding that it aimed to close “a procedural loophole and upholding the commercial primacy of the committee of creditors while safeguarding judicial oversight over distribution disputes in a segregated and efficient manner”.

Some experts also flagged the likely challenges in implementation.

“The amendment might face implementation challenges, as by separating the approval of the resolution plan from distribution of proceeds, the creditors may initiate parallel litigation over their share and the same may lead to conflicting judgments or legal uncertainty. Therefore, the success of this amendment would depend upon clear procedural rules for post approval dispute resolution and preserving creditor confidence in fairness of process,” Aldak said.