Module: | Specialized Audits, Tech & ESG Disclosures
Q95: Consider the following statements regarding the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 introduced in the Lok Sabha:
1. The proposed Bill introduces a dedicated legal framework to handle cross-border insolvency, allowing coordination between Indian courts and foreign bankruptcy jurisdictions.
2. The Bill strictly prohibits the consolidation of insolvency proceedings for multiple companies belonging to the same corporate group under a "group insolvency" framework.
3. One of the core stated objectives of the amendments is to reduce procedural timelines and improve the value maximization of distressed assets, as creditor haircuts relative to admitted claims historically hover around 67 percent.
Which of the above statements is/are incorrect?
2. The Bill strictly prohibits the consolidation of insolvency proceedings for multiple companies belonging to the same corporate group under a "group insolvency" framework.
3. One of the core stated objectives of the amendments is to reduce procedural timelines and improve the value maximization of distressed assets, as creditor haircuts relative to admitted claims historically hover around 67 percent.
Which of the above statements is/are incorrect?
✅ Correct Answer: B
🎯 Quick Answer:
B. Only 2 is incorrect.The 2025 Amendment Bill seeks to patch critical loopholes discovered after a decade of the law's operation.
Structural Breakdown: Statement 1 is correct; incorporating the UNCITRAL Model Law on Cross-Border Insolvency is a flagship feature of the bill.
Statement 2 is incorrect; the Bill does exactly the opposite—it explicitly PROPOSES frameworks for "group insolvency" to allow the NCLT to resolve complex, heavily intertwined holding-subsidiary structures together rather than piecemeal.
Statement 3 is correct; MCA data at the end of 2025 showed that while the IBC rescued hundreds of companies, the average haircut for creditors remained a severe 67%, driving the need for faster timelines to prevent asset depreciation.
Historical/Related Context: The collapse of the Videocon Group highlighted the absurdity of the old law, where 13 different subsidiaries of the same group faced 13 different, uncoordinated bankruptcy trials, destroying the economic value of the overall conglomerate.
Causal Reasoning: When a conglomerate operates with a centralized treasury (moving cash seamlessly between subsidiaries), trying to resolve one bankrupt subsidiary without looking at the parent company is financially impossible.
Group insolvency frameworks allow the court to untangle and sell the asset as a unified, more valuable whole.