IBC Amendments to Permit Partial Asset Sales and Grant 120-Day Second Opportunity for Revival Before Liquidation
- REEDLAW
- Aug 16
- 2 min read
REEDLAW Legal News Network reports: In a significant policy development, the Central Government has proposed amendments to the Insolvency and Bankruptcy Code (IBC) aimed at enhancing flexibility in the corporate insolvency resolution process. The amendments seek to prioritise revival over liquidation by introducing a 120-day second opportunity for resolution after the expiry of the 330-day statutory limit and by formally recognising partial asset sales as a mechanism for value maximisation.
The proposed reforms introduced in the Lok Sabha underscored the Code’s rescue-oriented intent, empowering insolvency tribunals to grant a fresh 120-day period, subject to 66% Committee of Creditors (CoC) approval, for the consideration of a new resolution plan before liquidation is ordered. By allowing a recommencement of CIRP even beyond statutory timelines, the amendments aim to prevent abrupt liquidations triggered solely by procedural lapses, ensuring that viable opportunities for revival remain available to creditors and stakeholders.
The amendment was particularly designed to avoid abrupt liquidation orders merely due to the expiry of timelines, as seen in cases such as Bhushan Power & Steel Ltd., where the Supreme Court had earlier annulled an approved resolution plan on the ground of exceeding the 330-day period—a decision later recalled.
The proposed Section 33(1A) of the IBC would empower the adjudicating authority to recommence CIRP even after the statutory period had elapsed, thereby ensuring that viable revival opportunities were not lost due to procedural constraints. This legislative clarity would also formalise what stakeholders could already request under the existing framework, thus reinforcing the rescue-oriented intent of the IBC.
Additionally, the amendments aimed to facilitate partial resolution through the sale of one or more assets of the corporate debtor when the sale of the business as a whole was not feasible. This measure was expected to be particularly beneficial for companies with diversified operations, enabling targeted sales to maximise value recovery. While the Insolvency and Bankruptcy Board of India (IBBI) had already incorporated such flexibility into its regulations in May 2025, embedding the provision directly into the Code would provide stronger legal backing and reduce the risk of legal challenges.
Experts noted that the second attempt at resolution would benefit from the insights and learnings gained during the initial process, potentially leading to more pragmatic and value-optimising outcomes for creditors and stakeholders. By explicitly recognising partial asset sales and a 120-day revival extension, the amendments reflected a deliberate policy shift towards preserving economic value and employment, in line with global best practices in insolvency resolution.
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