STUDENT RESEARCH DEVELOPMENT COUNCIL, GNLU

(CORPORATE, BUSINESS AND FINANCE LAWS GROUP)

A Research Paper on-

“A COMPREHENSIVE ANALYSIS OF EVOLVING

LANDSCAPES: UNRAVELING THE AMENDMENTS TO THE
INSOLVENCY AND BANKRUPTCY CODE IN INDIA”

Prof. (Dr.) William Nunes

FACULTY CONVENOR, STUDENT RESEARCH DEVELOPMENT
COUNCIL

Student Members:
DEV SHROFF | ARYAN | HEMANG NAGPAL| DHRUV HARJANI |
JHALAK BHATIA| DEEYA
Table of Contents
I. What is the I&B Code?.......................................................................................................3

II. Why is there a need to update the IBC every now and then?.............................................4

III. What are the amendments to the IBC?...............................................................................5

IV. The Insolvency and Bankruptcy Code (Amendment) Act, 2018........................................6

V. The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018.........................10

VI. The Insolvency and Bankruptcy Code (Amendment) Act, 2019......................................13

VII. The Insolvency and Bankruptcy Code (Amendment) Act, 2020..................................16

VIII. The Insolvency and Bankruptcy Code (Second Amendment) Act, 2020.....................19

IX. The Insolvency and Bankruptcy Code (Amendment) Act, 2021......................................21

X. Conclusion........................................................................................................................24
 I. What is the I&B Code?

1
The Insolvency and Bankruptcy Code (IBC) of India, enacted in 2016, heralds a
transformative legal framework designed to systematically address the complexities
associated with insolvency and bankruptcy. This comprehensive legislation consolidates and
streamlines the insolvency resolution process, establishing a more efficient and time-bound
mechanism for distressed companies.

At its core, the IBC aims to achieve a swift and effective resolution of insolvency,
emphasizing the maximization of asset value for debtors. Its applicability spans individuals,
companies, and limited liability partnerships, offering a unified legal structure to navigate
insolvency across diverse entities. Integral to the IBC is the formation of the Insolvency and
Bankruptcy Board of India (IBBI), a regulatory authority responsible for overseeing
insolvency resolution processes, setting standards, and regulating insolvency professionals.
The IBBI plays a pivotal role in maintaining transparency, accountability, and efficiency in
the insolvency resolution ecosystem.

A noteworthy aspect of the IBC is its creditor-centric approach, granting financial creditors
the authority to initiate insolvency proceedings. Categorizing creditors into financial and
operational, the former actively engages in the decision-making process. The initiation of
insolvency resolution occurs through the National Company Law Tribunal (NCLT) for
corporate debtors and the Debt Recovery Tribunal (DRT) for individuals and partnership
firms. The IBC introduces a time-bound resolution process, capped at 180 days, extendable
by 90 days, to ensure a prompt resolution. This time-sensitive approach aims to prevent
undue delays, preserving the economic value of the debtor's assets.

Should resolution not be achieved within the stipulated timeframe, the corporate debtor faces
liquidation. The liquidation proceeds follow a specific order of priority, adhering to a
waterfall mechanism. Secured creditors enjoy precedence over unsecured creditors in the
distribution of these proceeds. A pivotal component of the IBC is the role played by
Insolvency Professionals (IPs) in managing the resolution process. These professionals,
registered and regulated by the IBBI, bring expertise and adhere to ethical standards,
contributing to the effective functioning of the insolvency resolution process.

1
Insolvency and Bankruptcy Code, 2016, Act 31 of 2016.
Furthermore, the Code introduces the concept of voluntary initiation of insolvency
proceedings by corporate debtors. This provision empowers financially distressed companies
to proactively address their challenges, adding a dynamic dimension to the insolvency
framework. Since its inception, the IBC has undergone several amendments, reflecting a
commitment to addressing emerging challenges and enhancing the insolvency resolution
process's efficacy. These amendments demonstrate a dedication to continuous improvement
and adaptation to the evolving economic landscape.

The Insolvency and Bankruptcy Code of India represents a paradigm shift in approaching
insolvency and bankruptcy. By prioritizing creditor rights, establishing a time-bound
resolution process, and incorporating a waterfall mechanism for distribution of proceeds, the
IBC contributes to a robust and efficient insolvency ecosystem, fostering stability and growth
in the Indian economy.

II. Why is there a need to update the IBC every now and then?

The need to update the Insolvency and Bankruptcy Code (IBC) in India arises from several
factors, reflecting the dynamic nature of the economic and legal landscape.

 Addressing Emerging Challenges: The business environment is subject to constant

evolution, and new challenges or complexities may arise over time. Amendments to
the IBC allow policymakers to address these emerging issues effectively, ensuring
that the insolvency resolution process remains robust and adaptable.

 Closing Regulatory Gaps: As the insolvency framework is put into practice,

regulatory gaps or ambiguities may become apparent. Periodic updates to the IBC
help in closing these gaps, clarifying legal provisions, and providing a more
comprehensive and coherent regulatory framework.

 Improving Efficiency: Continuous evaluation of the IBC's functioning allows

policymakers to identify areas where the resolution process can be made more
efficient. Amendments may streamline procedures, reduce bottlenecks, and enhance
the overall effectiveness of the insolvency resolution mechanism.

 Learning from Implementation: The implementation of any new legal framework

provides valuable insights into its practical challenges and successes. Updates to the
 IBC allow policymakers to incorporate lessons learned from real-world cases, making
adjustments to better align the law with the intended outcomes.

 Adapting to Economic Changes: Economic conditions, both domestic and global, can
impact the financial health of businesses. Changes in economic circumstances may
necessitate adjustments to the IBC to ensure that it remains responsive to the needs of
businesses facing insolvency during different economic cycles.

 International Best Practices: The field of insolvency and bankruptcy is continually

evolving globally, with countries adopting new best practices. Periodic updates to the
IBC enable India to align its insolvency framework with international standards,
facilitating a more seamless integration into the global economic landscape.

 Protecting Stakeholder Interests: The interests of various stakeholders, including

creditors, debtors, and investors, may evolve over time. Amendments to the IBC
provide an opportunity to balance these interests and ensure fair treatment for all
parties involved in the insolvency resolution process.

 Legal Precedents and Court Decisions: Judicial interpretations and decisions on

insolvency cases contribute to the development of legal precedents. Periodic updates
to the IBC can incorporate clarifications or adjustments based on court decisions,
providing a more nuanced and well-defined legal framework.

III. What are the amendments to the IBC?

18 Jan, 2018 The Insolvency and Bankruptcy Code (Amendment) Act, 2018

17 Aug, 2018 The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018

06 Aug, 2019 The Insolvency and Bankruptcy Code (Amendment) Act, 2019

13 Mar, 2020 The Insolvency and Bankruptcy Code (Amendment) Act, 2020

23 Sep, 2020 The Insolvency and Bankruptcy Code (Second Amendment) Act, 2020

12 Aug, 2021 The Insolvency and Bankruptcy Code (Amendment) Act, 2021
 IV. The Insolvency and Bankruptcy Code (Amendment) Act, 20182

a. situation before the amendment

Prior to the series of amendments, the Insolvency and Bankruptcy Code of India, 2016,
underwent significant changes that expanded its scope, clarified resolution professional
duties, introduced eligibility criteria, and addressed gaps in penalty provisions. Initially, the
Code's applicability was limited to specific entities, such as companies incorporated under the
Companies Act, 2013, or governed by special acts, Limited Liability Partnerships (LLPs),
and others specified by the Central Government through notification. However, personal
guarantors to corporate debtors, partnership firms, proprietorship firms, and individuals were
notably excluded from its purview.

b. need for an amendment

The amendments to the Insolvency and Bankruptcy Code of India, particularly in Sections 2,
25, 29A, and the introduction of Section 235A, collectively signify a transformative shift in
the approach to insolvency resolution, driven by the recognition of the evolving dynamics
and challenges within the financial landscape. Before the amendments, the Code's scope was
confined primarily to corporate entities, excluding personal guarantors, partnership firms,
proprietorship firms, and individuals. The amendment to Section 2 was a deliberate step
toward inclusivity, acknowledging that insolvency and bankruptcy issues extend beyond
corporate structures. This expansion aligns with the overarching objective of the Insolvency
and Bankruptcy Code to provide a comprehensive and efficient resolution framework that
addresses the diverse nature of entities facing financial distress.

The inclusion of personal guarantors and various non-corporate entities within the Code's
purview reflects a holistic perspective on insolvency resolution. It recognizes that financial
challenges can affect a broad spectrum of entities, necessitating a more encompassing
framework. This amendment is not merely a legal expansion but a strategic move to promote
a more inclusive, effective, and time-bound process for resolving insolvency, fostering
entrepreneurship, and balancing the interests of creditors and debtors. The overarching goal is
2
The Insolvency and Bankruptcy Code (Amendment) Act, 2018, available at
https://ibbi.gov.in//webadmin/pdf/legalframwork/2018/Jan/182066_2018-01-20%2023:35:29.pdf
to enhance the Code's coverage and effectiveness in addressing the complexities of
insolvency scenarios in India.

In Section 25, the amendment brought clarity to the duties of resolution professionals. The
original provision emphasized asset preservation and business continuity but lacked explicit
instructions to invite specific stakeholders, such as prospective lenders and investors, to
submit resolution plans for the corporate debtor. The amendment rectified this by introducing
a new mandate in sub-section (2)(h) of Section 25, requiring resolution professionals to invite
prospective resolution applicants who meet specified criteria. This addition is pivotal,
ensuring a more inclusive and participatory resolution process that involves diverse
stakeholders, aligning with the broader goals of transparency and stakeholder engagement in
insolvency resolution.

The introduction of Section 29A addressed a crucial need for clear eligibility criteria in the
resolution process. Before this amendment, the Code lacked specific disqualification criteria
for entities or individuals submitting resolution plans. The absence of such provisions created
a regulatory gap, potentially allowing individuals with questionable backgrounds to
participate in the resolution process. Section 29A sought to bridge this gap by establishing a
comprehensive list of disqualifications, including insolvency status, wilful default, non-
performing asset classification, criminal convictions, and more. This addition aimed to ensure
the integrity and suitability of resolution applicants, contributing to the effective functioning
of the insolvency framework by preventing potential abuses and aligning with the broader
goals of fairness and transparency.

Section 235A introduced a new dimension to the Code by addressing penalty provisions for
contraventions. Before this amendment, there might have been challenges in enforcing
penalties for certain contraventions, particularly when specific penalties were not outlined.
This gap potentially created uncertainty and loopholes in the enforcement and deterrence of
non-compliance. The inclusion of Section 235A established a general penalty clause,
prescribing fines for contraventions not explicitly covered by other provisions. This addition
aimed to enhance the enforceability of the Insolvency and Bankruptcy Code, ensuring
consequences for contraventions even when specific penalties were not previously defined.
 c. objectives of the amendment

The amendment to Section 2 was driven by multiple objectives. Firstly, it aimed to broaden
the scope of the Code, recognizing that financial distress extends beyond corporate entities to
personal guarantors, partnership firms, proprietorship firms, and individuals. This shift
towards inclusivity reflects an understanding that a diverse range of entities may face
insolvency challenges, necessitating a regulatory framework that can comprehensively
address their unique circumstances.

Secondly, the amendment sought to adopt a holistic approach to insolvency, acknowledging

the diverse nature of entities facing financial challenges. The initial version of the Code
predominantly focused on corporate insolvency, and the amendment addressed this limitation
by recognizing the need for a regulatory framework that could effectively cater to the unique
circumstances of personal guarantors and various forms of non-corporate entities.

In Section 25, the amendment introduced pivotal changes with the explicit objective of
clarifying and specifying the duties of the resolution professional. The addition of sub-section
(h) mandated the resolution professional to invite prospective resolution applicants,
formalizing a crucial aspect of the insolvency resolution process. This move aimed to
empower resolution professionals to establish criteria for applicants, considering the
complexity and scale of operations of the corporate debtor's business. Significantly, the
amendment recognized the role of the Board, allowing for the specification of conditions for
resolution applicants, emphasizing a commitment to aligning the insolvency resolution
process with regulatory standards. The amendment to Section 29A was guided by several key
objectives focused on strengthening the integrity and effectiveness of the insolvency
resolution process. Firstly, it aimed to establish clear and stringent eligibility criteria for
entities or individuals submitting resolution plans. This objective sought to prevent the
participation of individuals with questionable financial backgrounds, criminal convictions, or
conflicting interests, ensuring that only qualified and reliable applicants engaged in the
resolution process.
The introduction of Section 235A addressed a regulatory gap concerning penalties for
contraventions. The objective of the amendment was to enhance the enforceability and
effectiveness of the legal framework by introducing a general penalty clause. This aimed to
deter non-compliance with the Code and its regulations by establishing a clear consequence
for contraventions.

d. what changed after the amendment

In Section 2, the Code underwent a monumental shift as it embraced a more inclusive

approach. The amendment marked a departure from its initial focus on corporate insolvency
by incorporating personal guarantors, partnership firms, proprietorship firms, and individuals
into its ambit. This expansion aimed at creating a comprehensive and adaptable framework
capable of addressing insolvency challenges across diverse entities. Noteworthy is the
recognition of the need for a structured and regulated process to address financial distress at
the individual level, demonstrating a proactive effort to align the Code with the nuanced
dynamics of the broader financial landscape in India.

Section 25 witnessed a pivotal change with the introduction of sub-section (h), explicitly
mandating resolution professionals to invite prospective resolution applicants. This
amendment aimed to provide a clear and emphasized directive, urging active stakeholder
engagement in the insolvency resolution process through the submission of comprehensive
resolution plans. Furthermore, the amendment bestowed the resolution professional with the
authority to establish criteria for prospective resolution applicants, subject to the approval of
the committee of creditors. This grant of authority added objectivity and transparency to the
selection process, aligning it with predefined criteria and ensuring that qualified applicants
participated in the resolution process. The emphasis on active engagement and transparent
criteria underscored the intent to foster a more participatory, objective, and credible
insolvency resolution environment.

Section 29A, post-amendment, brought about a paradigm shift by introducing comprehensive

and stringent disqualifications for entities or individuals submitting resolution plans. This
amendment responded to the crucial need for clarity and integrity in the insolvency resolution
process. The revised section articulated a detailed list of disqualifications, encompassing
factors such as being an undischarged insolvent, a wilful defaulter, having a non-performing
asset account, facing criminal convictions, or being disqualified under various legal
provisions. The objective was to ensure the integrity and suitability of resolution applicants,
thereby preventing the participation of individuals with questionable financial backgrounds or
conflicting interests. This change was instrumental in aligning the insolvency resolution
process with regulatory standards, promoting fairness, and building trust among stakeholders.

The introduction of Section 235A addressed a significant regulatory gap concerning penalties
for contraventions in the Insolvency and Bankruptcy Code. Before the amendment, there
were potential enforcement challenges due to the absence of specific penalties for certain
contraventions. Section 235A filled this void by establishing a general penalty clause
applicable in instances where no penalty or punishment was expressly provided in the Code
for a contravention. This change marked the establishment of a clear and specified penalty
framework for contraventions, ranging from one lakh rupees to two crore rupees. The
objective was to enhance the enforceability of the Code by ensuring that individuals or
entities found in violation faced a financial penalty, even in cases where specific penalties
were not previously outlined. Section 235A aimed to bolster the regulatory framework by
providing a tool to penalize contraventions that may have otherwise gone unpunished due to
the absence of specific penalties.

V. The Insolvency and Bankruptcy Code (Second Amendment) Act, 20183

a. Limitations Faced Before the Amendment

The status of real estate allottees remained ambiguous within the legal framework, as the
original Insolvency and Bankruptcy Code (IBC) and subsequent amendments, along with an
ordinance, failed to clarify their position. The absence of a clear designation for allottees as
either secured or unsecured financial creditors introduced uncertainty regarding their priority
in receiving dues from insolvency proceedings.

The insolvency process faced various restrictions, encompassing both substantive and
procedural aspects. Restrictions on the appointment of individuals as resolution professionals

3
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, available at
https://ibbi.gov.in//webadmin/pdf/legalframwork/2018/Aug/The%20Insolvency%20and%20Bankruptcy
%20Code%20(Second%20Amendment)%20Act,%202018_2018-08-18%2018:40:34.pdf
underwent amendments in the current act. Additionally, the voting thresholds within the
Committee of Creditors (CoC) were notably high, requiring substantial reduction for
resolutions to be effectively passed. This adjustment aimed to realize the primary objective of
the IBC, which is to facilitate a time-bound and efficient process for resolving insolvency and
bankruptcy in a transparent manner.

Recognizing the importance of Micro, Small, and Medium Enterprises (MSMEs) in India's
economic landscape and job creation, there was a perceived need to provide certain
relaxations to support their growth and development. To address these limitations and
enhance the effectiveness of the IBC, the Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018 was enacted by the Parliament as Act No. 26 of 2018.

b. Objectives of the Amendment

The objectives of the Amendment Act revolved around addressing key concerns in five
primary areas, aimed at enhancing the efficacy of the Insolvency and Bankruptcy Code
(IBC).

Firstly, the amendment sought to establish a clear and unambiguous status for Real Estate
Allottees. The original IBC and its subsequent amendments left this category in a legal grey
area, prompting the need for clarity on whether allottees should be considered secured or
unsecured financial creditors. The Amendment Act aimed to rectify this ambiguity, providing
a defined status for real estate allottees within the insolvency framework.

Secondly, changes were introduced in the composition and functioning of the Financial
Creditor's Committee. This adjustment aimed to streamline and optimize the decision-making
process within the committee, ensuring more effective participation in insolvency
proceedings.

The third key area addressed by the Amendment Act involved modifications to the voting
thresholds within the Committee of Creditors (CoC). The initial high voting thresholds were
recognized as impediments to efficient decision-making. The amendment aimed to
substantially reduce these thresholds, fostering a more agile and responsive resolution
process.

Another crucial objective of the Amendment Act was to define the scope of applicability of
the code to Micro, Small, and Medium Enterprises (MSMEs). Recognizing the unique needs
and challenges faced by MSMEs, the amendment sought to provide specific provisions and
relaxations to support their growth and development within the insolvency framework.

Lastly, changes were introduced to the resolution application process submitted before the
National Company Law Tribunal (NCLT). This aspect of the amendment aimed to streamline
and enhance the efficiency of the application process, ensuring that insolvency cases are
presented in a manner conducive to effective resolution.

c. Changes post the Amendment

1. Expanded Definition of the word “payment”

There are multiple amendments made in the 2 nd Amendment of 2018 that changed the word
“repayment” to “payment”. This was recommended by the ILRC (Insolvency Law Review
Committee) as the word payment carries a wider meaning. The word ‘payment’ is a wider
term which means “performance of an obligation by the delivery of money or some other
valuable thing accepted in partial or full discharge of the obligation”.

2. Corrected Section 5(5A) to exclude “a surety in a contract of guarantee to a

corporate debtor” from the shelter of moratorium.

The assets of corporate guarantors or personal guarantors of the corporate debtor will not get
the protection of stay provisions under section 14. Though co-extensiveness of the liability of
the surety with that of the principal debtor is a cardinal principle imbibed in the law of
contracts, there were some rulings which extended the roof of section 14 to the assets of
guarantors too. This explicit exclusion will reinforce the principle and will enable the
creditors to initiate action against the guarantors of the corporate debtor.

3. Inserted Section 5(24A) to define “related party”.

The Code defines "related party in relation to corporate debtor"; the Companies Act, 2013
defines "related party in relation to a company". There was a gap in deciphering "related
party of an individual". The amendment fills the gap. This is one-of-its-kind definition. Borne
out of necessity, the definition would be relevant while interpreting section 29A. "Related
party" is a much wider term than "relative". The definition includes not only relatives, but
also entities to which the individual might be "related".
 4. Withdrawal of corporate insolvency resolution process applications

Inserted Section 12A as mentioned above, therefore, presently, under rule 8 of the CIRP
Rules, the NCLT may permit withdrawal of the application on a request by the applicant
before its admission. The amendment provides for withdrawal post admission if the CoC
approves of such action by a voting share of 90%. The withdrawal shall be in a manner as
may be prescribed.

5. Initiation of corporate insolvency resolution process by authorized

representative of financial creditors

The amendment of Section 7 and insertion of Section 25A, as mentioned above have allowed
"any other financial person, on behalf of the financial creditor, as may be notified by the
Central Government" to make application to NCLT for initiation of corporate insolvency
resolution process and provide for them to participate and vote in the meetings of the CoC.

The ILRC recommended the intent of the Code was not to bar a guardian of a financial
creditor, administrator, or executor of estate of a financial creditor or debenture trustee and
the like, to trigger insolvency of a corporate debtor, and be a part of the CoC. Further, they
suggested an enabling provision to notify other entities who may file an application on behalf
of financial creditors may be provided for in the Code.

VI. The Insolvency and Bankruptcy Code (Amendment) Act, 20194

a. Situation before the amendment

Prior to the passage of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, India's
bankruptcy system had several difficulties that seriously reduced its effectiveness. Prior to the
modification, the situation was typified by a laborious and drawn-out settlement procedure
that was hampered by delays and ambiguous in certain important areas.

Therefore, to remove uncertainty from the code, the amendment was passed which in total
brought 8 major changes, 4 of them were insertion of explanations in various sections of the
code. Also, to make the conditions of application of section 7 and section 12 of the code
clear, provisos for the same were added.

4
The Insolvency and Bankruptcy Code (Amendment) Act, 2019, available at
https://ibbi.gov.in//uploads/legalframwork/630af836c9fbbed047c42dbdfd2aca13.pdf
Before the amendment, there was little clarification regarding the admission procedure,
which is a crucial first step in bankruptcy proceedings. This lack of clarity in how various
credit classes were treated complicated an already difficult procedure. The lack of a defined
hierarchy for the distribution of revenues made it difficult for creditors to prioritize their
claims, which further compounded their difficulties. The absence of an open and transparent
procedure frequently led to protracted legal battles and disagreements, which further slowed
down the settlement process and reduced value. This issue was resolved by amending section
30, section 31, section 33 and section 240.

Before the amendment, the environment was essentially beset by inefficiencies, procedural
roadblocks, and an unclear path forward for insolvency proceedings. The ramifications
extended beyond the direct parties involved and had an impact on the trust that creditors and
investors had in the economy as well as the general ease of conducting business. After these
difficulties were acknowledged, it became clear that the current insolvency system needed to
be revised.

b. Need for an amendment

One of the main reasons for the amendment's genesis was the ongoing problem of resolution
process delays. Due to the drawn-out process, distressed assets ran the danger of experiencing
more depreciation in the future. This not only harmed the chances of a profitable company
turnaround, but it also had wider economic ramifications. The necessity for a time-sensitive
strategy became apparent when it was realized how destructive delayed settlements may be to
both troubled enterprises and the wider economic environment.

The efficiency of the insolvency system was significantly influenced by the trust of creditors.
Creditors' confidence was damaged by the unclear handling of various credit classes and the
unpredictability of the admissions procedure. This mistrust showed itself in protracted legal
battles and disagreements, which further slowed down the settlement process. Therefore, by
offering a more transparent and predictable route for creditors to participate in bankruptcy
procedures, the change aimed to engender trust among them.

The amendment's main goal was to make it easier to recover troubled businesses in a
comprehensive manner. While addressing insolvency, the current structure has to be
enhanced to take into account the various interests of all parties concerned. The modification
was deemed necessary because it was necessary to establish a system that would not only
effectively address insolvency but also encourage troubled enterprises to become sustainable
contributors to the economy.

c. Objectives of the amendment

The amendment's main goals were to provide a time-bound framework and streamline the
settlement process. In addition to decreasing the value of distressed assets, delays in resolving
insolvency also hampered the revival of the economy as a whole. The amendment aimed to
speed up the resolution process by establishing precise deadlines, so that financially troubled
businesses might quickly become solvent and make a beneficial impact on the economy.

The modification aimed to guarantee the equitable treatment of operational creditors during
the resolution process, acknowledging their crucial role in the daily operations of a
corporation. The goal was to develop a more inclusive and balanced strategy that took into
account the various interests of all stakeholders by giving operational creditors more voice in
decision-making.

The change sought to improve the ease of doing business in India on a broader economic
front. One essential element of an environment that is conducive to business is a strong and
effective insolvency system. The amendment aimed to foster trust among local and foreign
investors by resolving the highlighted restrictions and establishing favorable circumstances
that would foster company expansion and economic development.

A key goal was to safeguard the interests of creditors. This required making certain that the
rights of creditors were given priority during the settlement process in an open and just way.
One important tool for protecting creditors' interests and coordinating their involvement with
the larger goal of a successful settlement was the "Committee of Creditors" being given more
decision-making ability.

d. What changed after the amendment

Following the modification, the adoption of a time-bound framework was one of the most
noticeable alterations. For every step of the insolvency procedure, from admission to
resolution, precise deadlines were set. This game-changing change sped up the settlement
process considerably, avoiding the protracted holdups that typified the pre-amendment
situation. Now that distressed assets could proceed more quickly via the resolution pipeline,
there was less chance of further depreciation and the recovery would be more effective.
The legislation significantly altered the function of operational creditors. Given their
significance to a company's daily operations, operational creditors were given more influence
over the resolution process. This empowerment ensured that the interests of operational
creditors were taken into consideration in a more inclusive manner.

The amendment changed the requirements for applicants seeking resolutions in terms of
eligibility. This was a calculated step to guarantee that the resolution process included only
legitimate and serious candidates. The modification sought to lower the possibility of
unsuccessful resolutions or the re-entry of promoters who had defaulted by strengthening
eligibility requirements. This modification brought caution to the system and brought it closer
to the goal of lasting and successful resolutions.

These modifications improved the insolvency framework's overall predictability when taken
as a whole. The modified framework offered clarity, efficiency, and equal treatment, allowing
creditors, investors, and stakeholders to traverse the resolution process with more confidence.
This increased predictability supported the larger economic goal of making conducting
business easier and created an atmosphere that was favorable to investment and investor
confidence.

VII. The Insolvency and Bankruptcy Code (Amendment) Act, 20205

a. Situation before the amendment

The antecedent IBC, was transformative in its ambition and the amendment made on 13 th
March 2020 in the Insolvency and Bankruptcy Act aimed to revamp the framework of
insolvency in the country. The amendment aimed at easing the corporate insolvency
resolution process (CIRP). The IBC code has been amended multiple times in the past to
improve the code and remove any discrepancy and bottlenecks and streamline the process.

The amendments act has amended sections 5,7,11,14,16,21,23,29(A),32(A),227,239 and 240.

Previous to the amendments Section 5(12), being incorporated into the code, it stipulated that
in instances where the interim resolution professional (IRP) is not designated in admission
order, the initiation of the insolvency period would be construed as the date on which said

5
The Insolvency and Bankruptcy Code (Amendment) Act, 2020, available at
https://ibbi.gov.in//uploads/legalframwork/d36301a7973451881e00492419012542.pdf
IRP is appointed by the Adjudicating Authority. The amendment helped in widening the
scope and streamlining the process of resolution.

The amendments provided in Section 7 of the Act has a prescribe criterion has been instituted
to regulate the commencement of the Resolution Process by a specific class of financial
creditors.

The Amendment Act has introduced Explanation II to Section 11 of the Code. According to
this explanation, entities falling within the ambit of clauses (a) to (d) of Section 11 of the
Code, commonly referred to as corporate debtors, are now authorized to commence
Corporate Insolvency Resolution Process (CIRP) against other corporate debtors. This marks
a departure from the previous restriction that prohibited such initiation

Previously, the Adjudicating Authority was mandated to designate an Interim Resolution

Professional (IRP) within a period of 14 days from the initiation of the insolvency
commencement date.

b. Need for the amendment

The amendment in the Insolvency and Bankruptcy Code is aimed at improving the
shortcoming of the past IBC code and providing clarity in the initiation of insolvency
proceeding and protection of critical supplies.

The change in Section 5 (12) has been omitted and therefore the commencement date would
be the date of admission of an application filed under Section 7,9 or 10 of the Code for
initiating the CIRP by the National Company Law Tribunal (NCLT) irrespective of the fact
whether an Insolvency Resolution Professional has been appointed on such a date or not yet
been appointed.

The amendment Act has also amended the Section 7 of IBC code which supports the
inclusion of 3 new proviso under sub-section (1) right before the explanation of Section 7.
Section7(1) of the stipulates that a financial creditor, either independently or in conjunction
with other financial creditors, is entitled to submit an application before the National
Company Law Tribunal (NCLT) in the event of a default. The amendments incorporated
herein establish a minimum threshold for a specific category of financial creditors,
empowering them to institute insolvency proceedings under the Code.
Amendments in Section 16 helped stating that the IRP shall be appointed on the insolvency
commencement date rather than the previous 14 day period provided for the appointment,
which helped in expediting the process.

Section 21 has been amended to in sub- section 2 in second proviso, the words “or
completion of such transactions as may be prescribed” has been inserted after the words
“convertible into equity shares”. The first proviso of section21(2) shall not apply to financial
creditors who are related to corporate debtors. As a result of the completed transactions
specified by the Central Government under Section 239(2)(fa) of the Code, predating the
insolvency commencement date, the aforementioned amendment has conferred authority
upon the Central Government to prescribe additional completed transactions. In Section 23 a
substitution has been made in Section23(1) The latest proviso empowers the Resolution
Professional to manage a Corporate Debtor's operations beyond the designated period of
Corporate Insolvency Resolution Process (CIRP), pending the Adjudicating Authority's
approval of the resolution plan under Section 31(1) or the appointment of a liquidator under
Section 34 of the Code. This ensures a smooth transition and effective administration during
the corporate insolvency proceedings.

Section 29A of the principal act has been amended wherein a change has occurred in
Explanation I as provided in clauses (c) and (j) of the code. Section 29 helps individuals who
are ineligible to the resolution application. With the changes being applicable its provided
authority to the Central Govt to suggest any completed transaction to determine the eligibility
of any individual to be a resolution applicant, in addition to the prohibited preexisting
criterion in Section 29A of the IBC Code.

c. What changed after the amendment

There have been amendments taken place in almost 12 sections of the Insolvency and
Bankruptcy Code to update and improve the code.

Section 32 of the IBC Code an entire Section has been added which is termed as 32A which
expanded the scope of the code and entered the assets of the Corporate Debtor into the
preview of the code under Section32A (1) and Section 32A (2). The Code took a shift from
its less inclusive approach to expanding its scope to multiple areas of the process. The
addition of explanation has provided an improved clarity on the subject matter of Relation of
property, which was the need of the law from the various situation examined in real life
cases, which the amendment exceptionally addressed. The amendment significantly extends a
protective and beneficial impact by shielding the new management and its executives from
unwarranted harassment and legal challenges often encountered post assuming control of the
Corporate Debtor.

The amendments into the Section 7 of the IBC Code reflect the need for the better
understanding of the code which is being provided by the addition proviso’s updated by the
Amendment Act. The Addition of the three proviso under Sub-Section (1) of the code aims at
establishing more stringent prerequisites for initiating corporate insolvency resolution
processes, imposing collective action requirements on specified financial creditor classes.
The enhanced Section 7 of the IBC is better equipped dealing with the purpose intended for
the Section in the Principle Act.

Section 5 of the Code has been amended to include the additions of the clause 12 and clause
15 to the Section 5 which are aimed at replacing the insolvency commencement date which is
the same as the date as on which the application has been filed, the process of initiating CIRP
and expediting the process of CIRP under the code.

The inclusion of clause 15 under the section 5 which have inserted alternate wording into the
code aims at enhancing the clarity and understandability of the section and to include any
other debts as interim finance if so notified, in addition to the one, which may be raised by
the resolution professional during CIRP.

d. Is the amendment successful/positive changes

The amendments made by the ordinance of 28.12.2019 has been driven by the imperative to
preserve the going concern status and optimize the value of a corporate debtor. These
changes are indispensable to forestall potential misuse of the Code by specific classes of
financial creditors. Furthermore, the amendment furnishes safeguards, encompassing
immunity from corporate debtor prosecution, protective measures against corporate debtor
property actions, and indemnification for the successful resolution applicant, contingent upon
meeting specified conditions. The Amendment Act also has attempted to make the Corporate
Insolvency Resolution Process (CIRP) more flexible and streamlined and the act also cleared
many doubts which were posed as the as a result of the previous code. Instances that affect
the IBC Code that have made the introduction of minimum threshold of real estate, which
will make the remedy provided under the Code to a real estate allottee, completed
Overall the amendments have shown a propensity towards a positive shift in the current
scenario and judging from the future status they were an important stepping stone for
curren6t shape the IBC Code has taken place, the amendment Act had its shortcomings but as
an overall adjustment to the act it resulted in positive net change which helped in removing
various bottlenecks and practical difficulties which were faced during the Implementation of
the act.

Certainly, the amendments introduced in the Code by the Amendment Act mark a significant
stride toward the efficacious enforcement of the Code, dismantling impediments that have
lingered in the path of its seamless implementation. These nuanced revisions embody a
forward-looking approach, enriching the legal landscape governing insolvency proceedings.

VIII. The Insolvency and Bankruptcy Code (Second Amendment) Act, 20206

a. Situation before the amendment

Due to effects of Covid 19 on the economy, there was huge financial stress on the companies.
To help the corporate sector, the Government of India passed the IBC 2 nd Amendment bill
2020. The bill proposed a temporary suspension of the initiations of the corporate insolvency
resolution process (CIRP) under the Code. There was a need to provide relief to the
companies who suffered due to the pandemic and help them recover without being in
constant fear of Insolvency.

b. Objectives of the amendment

The Insolvency and Bankruptcy Code, 2016 (the Code) was introduced with the aim of
consolidating and revising laws pertaining to the reorganization and resolution of insolvency
for corporate entities, partnerships, and individuals within a specified timeframe. The primary
objectives include enhancing the value of assets for such entities, fostering entrepreneurship,
ensuring access to credit, and maintaining a balance among the interests of various
stakeholders. This encompasses modifying the sequence of government dues payment
priority.

Additionally, the establishment of the Insolvency and Bankruptcy Board of India is a key
component of this legislative framework. It was introduced to amend and bring some changes
in the Insolvency & Bankruptcy (Amendment) Ordinance, 2020. One of the aims of the
6
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2020, available at
https://ibbi.gov.in//uploads/legalframwork/c1d0cde66b213275d9cf357b59bab77b.pdf
Code is to address Non-Performing Assets by establishing solutions. It outlines a
collaborative mechanism to resolve insolvency matters, ensuring fairness to all stakeholders
and preserving economic value throughout the process.

c. What changed after the amendment

This Code prohibits the initiation of insolvency procedures for business disputes, even if both
the Corporate Debtor and Creditors have the authority to do so. According to the proposed
law, neither the Corporate Debtor nor the Financial or Operational Creditors may begin
insolvency proceedings for failures that occur during the first six months, which is renewable
for a maximum of one year beginning on March 25, 2020. Furthermore, under certain
conditions specified in the Insolvency & Bankruptcy Code, the bill creates accountability for
misconduct and permits directors or partners of the corporate debtor to be held accountable
for contributing to the company's assets. The proceedings against personal guarantors could
still be initiated.

The temporary suspension of Sections 7, 9 and 10 which restricted Insolvency proceedings

made it possible to save companies who were on verge of Insolvency due to COVID-19. As
there was no way of knowing how long the pandemic was going to last Section 10A was
inserted which gave power to the central government to specify time period originally of 6
months and later extend it to 1 year in case the need arises. A new Subsection after
Subsection(2) was introduced in Section 66 which further stated that owing to new Section
10, all the Solvency proceeding were temporarily not allowed to take place and no resolution
professional were to file for Solvency proceedings during this period.

According to the Code, there exists a possibility for a director or partner of the corporate
debtor to be obligated to contribute personally to the company's assets under specific
circumstances. This obligation arises if the individual, despite being aware that insolvency
proceedings are inevitable, fails to exercise due diligence in minimizing potential losses for
the creditors. The Resolution Professional, responsible for overseeing the resolution process
upon the acceptance of a CIRP initiation application, can petition the NCLT to impose such
liability on these individuals.

d. Is the amendment successful/positive changes

There were few objections which were raised but despite these objections it was accepted by
the majority and gained huge support, given its objective of enhancing the nation's economic
situation. Referred to as progressive, the bill incorporates two features aimed at assisting
companies during the pandemic. The emphasis was on sustaining companies as going
concerns rather than hastening their liquidation. Since the enactment of the Insolvency &
Bankruptcy Code, 2016, a total of 258 companies were rescued from bankruptcy, while 965
firms opted for liquidation.

IX. The Insolvency and Bankruptcy Code (Amendment) Act, 20217

a. Situation before the Amendment

Prior to the series of amendments, there was Corporate Insolvency Resolution Process which
had a prolonged procedure. As per the Insolvency and Bankruptcy Code (IBC), the
stakeholders engaged in the Corporate Insolvency Resolution Process (CIRP) are required to
complete it within 330 days from the initiation of insolvency proceedings. By the end of
December 2020, over 86% of the ongoing insolvency resolution cases had exceeded the 270-
day deadline. Prolonged legal disputes initiated by previous owners and prospective buyers
stand out as a significant factor causing delays in the Corporate Insolvency Resolution
Processes (CIRPs). In CIRP, the time-consuming process of selling or liquidating a business,
which can extend over a year, often results in creditors recovering less than half of their
debts. In the Corporate Insolvency Resolution Process (CIRP), the costs related to court-
based bankruptcy proceedings can be significant. The disclosure of a bankruptcy filing has
the potential to adversely impact the actions of different stakeholders, including suppliers,
employees, and creditors, leading to uncertainties about the company's future. For instance,
suppliers might refrain from making deliveries due to concerns about the company's
creditworthiness, resulting in operational disruptions and additional financial decline. These
outcomes are harmful to both the business owner and the interests of creditors.

b. Details of the amendment enacted

The PIRP is exclusively applicable to Micro, Small, and Medium Enterprises (MSMEs) as
defined by the thresholds outlined in the Micro, Small and Medium Enterprises Development
Act, 2006, and its associated regulations. Similar to businesses of all sizes, MSMEs have
faced widespread challenges due to the Covid-19 Pandemic. Consequently, a separate chapter
dedicated to PIRP has been introduced within the Insolvency and Bankruptcy Code (IBC) to
address the unique circumstances of MSMEs. A key distinction between the CIRP and PIRP
7
The Insolvency and Bankruptcy Code (Amendment) Act, 2021,
https://ibbi.gov.in//uploads/legalframwork/0150ec26cf05f06e66bd82b2ec4f6296.pdf
mechanisms lies in the amalgamation of judicial and non-judicial processes in PIRP. Notably,
once an application for PIRP initiation is admitted, the Corporate Debtor retains management
control, overseen by a Resolution Professional, unlike CIRP. To initiate PIRP, MSMEs must
meet specific criteria, beginning with a monetary threshold. A Corporate Debtor with a
default of at least Rs. 10,00,000/- (Rupees Ten Lakh Only) is eligible to apply before the
Adjudicating Authority (AA). If the default amount exceeds Rs. 1,00,00,000/- (Rupees One
Crore Only), PIRP does not apply. Other conditions for MSMEs to initiate PIRP include not
undergoing PIRP or completing CIRP in the three years preceding the initiation date, non-
simultaneous proceedings of CIRP, eligibility under Section 29A of IBC, and no order for
liquidation under Section 33 of the IBC. The application for PIRP initiation, along with the
required fee, is filed before the AA, and the specified timeline for adjudication (admission or
rejection) is 14 days from the filing date.

c. Objectives of the amendment

 Cost Efficiency

As the corporate debtor continues to manage the company, there are no fees incurred for a
resolution professional ("RP"). Additionally, there are no costs associated with the disruption
of transferring management from the debtor to the RP and then to the resolution applicant.
Since this process occurs outside the courtroom, the company can avoid significant litigation
costs, along with the potential loss of reputation and goodwill.

 Swift Resolution

A pre-pack ensures a quicker resolution process within a shorter timeframe compared to the
general Corporate Insolvency Resolution Process (CIRP) under the Code, which typically has
a lengthy duration. The maximum time limit for completing Prompted Pre-packaged
Insolvency Resolution Process (PPIRP) is 120 days. This expedites the resolution, preserving
the value of stressed assets and preventing their degradation, thereby enhancing the efficiency
of the resolution.

 Value Maximization

The pre-pack, being a hybrid mechanism, eliminates many formal processes involved in
CIRP. By reducing the time required to complete the process, the PPIRP mechanism
maximizes the value of assets, preventing their depreciation over an extended period, such as
the 270 days (180+90) and 330 days in special cases under CIRP where the debtor
experiences stress.

 Reduced Burden on NCLT

Considering the population in India and the existing overload of insolvency petitions, the
tribunals are strained, lacking the necessary resources in terms of judges and infrastructure to
handle the overwhelming caseload. The PPIRP mechanism alleviates this burden by shifting
cases from the tribunal to an out-of-court restructuring process, reducing the time period.
Although informal, this process minimally involves the tribunal, resembling the concept of
pre-litigation mediation in commercial disputes, where the NCLT acts as a court of last resort
only when no settlement is reached.

 Confidentiality and Flexibility

The PPIRP mechanism, akin to alternative dispute resolution mechanisms, ensures

'confidentiality' during the process, keeping the dispute away from public scrutiny.
Additionally, this new mechanism eliminates the need for debtors to make advertisements
and disclosures in newspapers or on their website, providing an incentive for parties to reach
a settlement that protects the business's continuity by maintaining its goodwill and reputation.
Another advantage is the 'flexibility' of the semi-formal PPIRP process, enabling the
corporate debtor to retain control over its management, subject to the interests of creditors
and stakeholders who have relevant remedies under the Code in case of mismanagement by
the debtor, such as transferring control to the resolution professional.

d. What changed after the amendment

It introduced an alternate insolvency resolution process for MSMEs with defaults up to Rs 1

crore called the Pre-packaged Insolvency Resolution Process (PIRP). Distressed Corporate
Debtors (CDs) are permitted to initiate a PIRP with the approval of two-thirds of their
creditors to resolve their outstanding debt under the new mechanism. The PIRP also allows
for a Swiss challenge to the resolution plan submitted by a CD in case operational creditors
are not paid 100 % of their outstanding dues. (A Swiss Challenge is a method of bidding,
often used in public projects, in which an interested party initiates a proposal for a contract or
the bid for a project.) The PIRP is a timely initiative aimed at safeguarding viable Micro,
Small, and Medium Enterprises (MSMEs). However, operationalizing it exclusively for
MSMEs at present could be viewed as the initial phase in establishing a robust Pre-pack
system. This is anticipated to expand over time, akin to the evolution seen in the Insolvency
and Bankruptcy Code (IBC), guided by the development of legal principles and practices.

X. Conclusion

The comprehensive analysis of the amendments to the Insolvency and Bankruptcy Code
(IBC) reveals a concerted effort to enhance the effectiveness and responsiveness of the
insolvency resolution framework in India. The amendments, encapsulated in the Insolvency
and Bankruptcy Code (Second Amendment) Act, 2018, strategically addressed key lacunae
within the original legislation. The clarification of the status of Real Estate Allottees resolved
a longstanding ambiguity, fostering a more transparent and predictable insolvency process.

Changes in the Financial Creditor's Committee composition and the reduction of voting
thresholds in the Committee of Creditors aimed at expediting decision-making, ensuring a
more agile resolution process. The delineation of the code's applicability to Micro, Small, and
Medium Enterprises (MSMEs) recognized their unique challenges and provided tailored
provisions for their growth and development.

Moreover, modifications to the resolution application process before the National Company
Law Tribunal (NCLT) sought to streamline proceedings. Collectively, these amendments
signify a commitment to continuous improvement, reflecting the evolving dynamics of the
economic and legal landscape. The refined IBC stands poised to foster a more robust,
transparent, and time-bound insolvency resolution mechanism, aligning with India's
aspirations for a resilient and efficient financial ecosystem.