Beyond one-size-fits-all: Asset-wise bids could reshape insolvency proceedings

Companies undergoing insolvency proceedings may soon be allowed to receive multiple resolution plans for different assets or business units.

A Lok Sabha Select Committee, examining the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, last week recommended explicitly permitting such an approach, departing from the current system that allows only a single, consolidated resolution.

The objective is to enable the sale of individual assets or business verticals of companies with diversified operations, instead of forcing a single, consolidated resolution, as per a statement issued by the committee on 17 December, available on the Lok Sabha website.

The panel said this could help maximise value realisation and attract a wider pool of bidders.

Insolvency practitioners and lawyers said the proposal marks an evolutionary shift in India’s insolvency regime, making it more market-driven and commercially flexible.

“Allowing multiple resolution plans marks a significant evolution of the Insolvency and Bankruptcy Code, 2016, moving it away from a rigid, single consolidated resolution construct towards a more flexible and market-responsive framework,” said Abhinav Agnihotri, partner at Kochhar & Co.

According to Yogendra Aldak, executive partner at Lakshmikumaran & Sridharan Attorneys, the proposed amendment would allow strategic buyers to bid selectively for assets or business units aligned with their core competencies.

“This would enable more precise and commercially realistic pricing, as bidders can focus on the intrinsic value of specific businesses instead of discounting for group-level risks,” Aldak said.

How the current regime works

Under the existing Insolvency and Bankruptcy Code (IBC) framework, while multiple bidders may submit resolution plans, the committee of creditors (CoC) can approve only one final plan for the corporate debtor as a whole.

The plan must resolve the company as a going concern, and once approved by the National Company Law Tribunal (NCLT), it becomes binding on all stakeholders.

Courts have consistently emphasised finality, and the law does not recognise backup or alternative plans. If an approved plan is later struck down or fails implementation, the insolvency process may have to restart or move towards liquidation.

The panel’s recommendation comes at a time when courts have set aside several high-profile resolution plans, exposing vulnerabilities in the single-plan framework.

The most prominent example is Jet Airways, where the Supreme Court set aside the resolution plan after prolonged delays and non-implementation, including failure to deposit ₹350 crore as required under the plan.

In the Bhushan Power & Steel case, the Supreme Court initially struck down JSW Steel’s ₹19,700-crore resolution plan for non-compliance with timelines, though the ruling was later reviewed, allowing JSW to retain the company.

Similarly, in Hindustan National Glass matter, the Supreme Court set aside the roughly ₹2,250-crore resolution plan approved in favour of AGI Greenpac, citing legal infirmities in the resolution process.

Nudge already underway

The proposed legislative change builds on a regulatory nudge earlier this year. In May 2025, the Insolvency and Bankruptcy Board of India (IBBI) notified the CIRP (Fourth Amendment) Regulations, 2025, which introduced the concept of part-wise resolution of a corporate debtor. CIRP is corporate insolvency resolution process.

Under the amended regulations, a resolution professional—subject to the approval of the committee of creditors—can invite bids simultaneously for the company as a whole, for one or more of its assets or business units, or for both.

The move was aimed at shortening timelines, preventing value erosion in viable business segments, and broadening investor participation, particularly from strategic buyers unwilling to assume group-level risks.

Resolution and liquidation

According to the Insolvency and Bankruptcy Board of India’s (IBBI) newsletter (July-September 2025), the IBC has resolved about 1,300 corporate insolvency cases through approved resolution plans, while 2,896 cases have ended in liquidation.

Creditors have realised around ₹3.99 trillion under resolution plans, about 32.4% of admitted claims, but over 170% of liquidation value. On average, resolution processes have taken 603 days to conclude.

Lawyers said the proposed change could strengthen the CoC’s negotiating leverage and improve recoveries.

Role of RFRP

Insolvency experts noted that the request for resolution plan (RFRP)—issued by the resolution professional—will remain central. The RFRP can preserve the CoC’s right to adopt flexible evaluation methods, including parallel consideration of multiple plans.

“Having more than one plan does not dilute price discovery; rather, it can strengthen competition, provided the asset profile and business viability support such interest,” said Mukesh Chand, senior counsel at Economic Laws Practice. He added that multiple plans could act as a safeguard if one plan is later challenged.

However, the committee’s recommendations do not clarify whether multiple plans could be retained as formal backup options if an approved plan is later set aside by courts.

“Permitting multiple resolution plans should not be conflated with creating a formal ‘backup plan’ mechanism,” Aldak cautioned.

“IBC jurisprudence has consistently emphasised finality once a plan is approved by the CoC and the adjudicating authority. Unless the law provides otherwise, keeping an alternative plan in reserve remains legally uncertain.”

Mohit Adatiya, director at NPV Insolvency Professionals, warned of potential risks.

“If implemented with proper safeguards, the approach can improve value and recoveries. But without clear guardrails, it could encourage cherry-picking of stronger assets while leaving weaker businesses unresolved,” he said.