By Ankit Raj (PH, CCL) ~ Law College Dehradun, Faculty of Uttaranchal University

& Parth Rishik, (PH, CSDR) ~ Law College Dehradun, Faculty of Uttaranchal University



Insolvency and Bankruptcy Code was codified in 2016, and such a complex law since then is in the stages of evolution with time. A complex law such as this will take time to adjust in accordance with the common law and the various commercial and corporate laws of India.  IBC introduced the Right to exit the competitive market by diluting the assets to pay off the debt on the business through the help of Insolvency professionals. With this change, the recovery rate now stands at 43% in cases of financial creditors and 49% in cases of operational creditors. Even the average time of the proceedings now stands at 1.6 years, compared to 4.3 years earlier. Another notable thing about IBC is that in the earlier resolution reign the cost of the resolution was 9%, which now stands at 1% post-IBC.

The purpose of this article is to probe into the descriptive study of the changes that took place post-IBC, in specific relation to the IBC Amendments.

Insolvency and Bankruptcy Code 2016: A journey through the Amendments

After being codified in 2016, the first amendment came in November 2017 which introduced three major changes. The first one being the introduction of Section 29A which was introduced to bar promoters from bidding for their own companies which means defaulters prevented from regaining control of their companies at a cheaper value. The second one also barred people from bidding who have remained in management or control of an account that has been an NPA for more than 12 months in order to ensure all defaulters are excluded from bidding. Third change related to the resolution plan, which stated that a resolution plan needed to be approved by at least 75% of the creditors, in order to ensure maximum consent amongst the committee of creditors (COC) is achieved, in simple words, this change aimed to get the smaller creditors to have a say in the insolvency resolution process. The first amendment practically focused on creating a credit culture that discourages defaults.

Shortly after the second amendment came as well in June 2018. This amendment opened the door to simplify the complex code and rectify the laws which were not applicable in the Indian Market, a total of five major changes were introduced. The first one being the Introduction of Sec12 A (Dealing with the withdrawal of insolvency proceedings against a company) To provide creditors option to withdraw insolvency application within 30 days of filing petition, it means promoters can offer a settlement to creditors before bankruptcy proceedings start and regain control of company-provided 90% of creditors agree. At the same time, promoters of MSMEs allowed to bid for their companies as it is difficult for smaller companies to find buyers, which means promoters of MSMEs can regain control of their companies, banks can reach an amicable agreement on the quantum of ‘haircut’ via a court-monitored process. Even the amendment introduced the new recognition of Home Buyers as financial creditors in order to give homeowners, who also provide funding for projects by making advance payments, a voice in the insolvency proceedings. Further, approval of the Resolution Plans was amended again to 66% of the creditors to give more say to larger creditors and increase the probability of reaching a resolution by reducing quorum and space for dissent by creditors with the aim to ensure More insolvency processes can reach a resolution. Lastly, Financial entities who are not related parties of promoter but own equity shares in a defaulter co allowed to bid, in order to widen the pool of bidders and increase the probability of cases being resolved.

Following this, another amendment came into existence on December 2018 that brought one major change in accordance with the Supreme Court’s Judgement in Brilliant Alloys v S Rajagopal & Others[1], under this, the Supreme Court reinterpreted section 12A of IBC and held that withdrawal of insolvency proceedings against a company after the process has started which means change came about to accommodate for ‘exceptional cases’ where proceedings have begun but promoter wants to make a better financial offer. In simple words, it means to give options for settlements between banks and defaulting promoters if 90% of creditors agree even at a later stage in the process. Provision used by promoters such as Ruias of Essar Steel and Sanjay Singal of Bhushan Power and Steel to seek withdrawal of insolvency process against their companies and propose better financial offers.

The most recent amendment, before the ordinance 2020 passed for IBC during the COVID-19 outbreak was in accordance with Swiss Ribbons v/s Union of India in January 2019. In this amendment, the criteria dealing with the eligibility of ‘connected persons’ and ‘related parties’ bidding for companies under the insolvency process was erased. Persons defined as “relatives” will face disqualification under Sec 29 A only if they have a business connection. This was done with the aim to make allowances for bidders who may be related to defaulting promoters but never had any business dealing with them. It means the potential pool of bidders for large assets can be widened as many families in India Inc are related through marriage.

The 2019 Amendment of IBC was not only limited to this. It brought about some major changes that aimed to strengthen the objectives of the code. The changes that took place in through 2019 amendments, notifications, regulations, and norms are as follow:

  1. The Insolvency and Bankruptcy Code (Amendment) Act, 2019 was introduced to further strengthen the objectives of the Code. This amendment delivers for the timely decision of cases, specifies minimum pay-outs to operational creditors in any resolution plan, infuses greater flexibility for corporate restructuring for maximizing the value of assets, and removes the voting deadlock for a class of financial creditors (such as the homebuyers).
  2. The Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 were issued on November 15, 2019, which provide a common framework for insolvency and liquidation proceedings of Financial Service Providers (FSPs) other than banks.
  3. Notification of application of Code to personal guarantors of corporate debtors coupled with corresponding Insolvency Resolution Process Rules and Bankruptcy Rules were introduced from November 15, 2019, and enforced from December 1, 2019, with the purpose that insolvency resolution and bankruptcy of personal guarantors under the IBC would complement the insolvency resolution of the corporate debtor. It is aimed at bringing much-needed borrowing discipline and propelling a cultural change in banking relationships.
  4. Certain further amendments were made to the Code by way of the Insolvency and Bankruptcy Amendment Ordinance, 2019 passed on December 28, 2019. The Key highlights of the said ordinance are ─
    1. the informed debts that would qualify as ‘last mile funding options’ to ‘prevent insolvency‘ would be considered as temporary finance and would thereby enjoy the highest priority in the insolvency or liquidation process under the IBC;
    2. threshold limit of a minimum of 100 allottees or 10% of the total number of allottees (whichever is lesser) has been imposed on homebuyers seeking to file an application against real estate project developers;
    3. extension of moratorium to prohibit termination of arrangements or agreements relating to the supply of critical goods and services or conferment of rights by any government authorities; and
    4. immunity to successful resolution applicants from any liability of the corporate debtor in relation to an offense committed prior to the commencement of insolvency and against any action including sale or attachment of the corporate debtor’s property in relation to such offense.


  • [1] Petition(s) for Special Leave to Appeal (C) No(s). 31557/2018. 

Tracing Evolution of IBC Through Amendments

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