India: Insolvency and Bankruptcy Code Update - August 2019

Last Updated: 9 September 2019
Article by DMD Advocates

The Insolvency and Bankruptcy Code, 2016 (Code) was enacted with a view to consolidate and amend the laws relating to reorganisation and insolvency resolution in a time-bound manner for maximisation of value of assets, to promote entrepreneurship, availability of credit and balancing the interests of various stakeholders. The Code and its corresponding rules and regulations have been amended from time to time to address deficiencies and fine tune the Code for effectiveness and achieving its objectives.

The Insolvency and Bankruptcy Code (Amendment) Act, 2019 (Amendment Act) is the latest amendment to the Code. The Amendment Act received Presidential assent on August 5, 2019. The effective date of the Amendment Act has been notified as 16 August 2019.

To access the Amendment Act, click here.

The key amendments to the Code are as follows:

Definition of resolution plan to include provisions for corporate restructuring

An explanation has been inserted in the definition of resolution plan to clarify that a resolution plan proposing the insolvency resolution of corporate debtor as a going concern may include the provisions for corporate restructuring, including by way of merger, amalgamation and demerger. The amendment would enable the market to come up with dynamic resolution plans for value maximisation.

National Company Law Tribunal (NCLT) to record reasons for delay in disposing an application for initiation of Corporate Insolvency Resolution Process (CIRP)

The Code stipulates that the NCLT must dispose of an application for initiation of CIRP within a period of 14 days from receipt of such application. However, there have been instances where NCLTs have taken over 14 days in deciding such applications. Therefore, in interest of speedy disposal and value maximisation of assets of the corporate debtor, a proviso has been inserted which requires that NCLT record its reasons in writing in case an application for initiation of CIRP is not disposed within the stipulated time of 14 days.

CIRP to be completed within 330 days

The Code mandated completion of CIRP within 180 days, with a one time extension of 90 days. However, the Courts have allowed exclusion of certain periods, such as time spent in litigation, from the mandatory completion period which has resulted in a number of unresolved CIRPs well beyond the timelines prescribed in the Code.

The Amendment Act mandates that the CIRP be completed within 330 days including any ex-tension of time granted and time taken under legal proceedings. The Amendment Act further provides for completion of CIRP within 90 days from the date of commencement of the Amendment Act in case of pending CIRPs that have been ongoing for over 330 days.

Voting by authorised representative representing a class of financial creditors

In order to facilitate decision making in the Committee of Creditors (CoC), especially when financial creditors are a large and heterogeneous group (for example in case of CIRP of a real estate company wherein homebuyers are financial creditors and constitute CoC), the Amendment Act provides that an authorised representative representing a class of financial creditors shall vote on behalf of all the financial creditors he/she represents in accordance with the decision approved by more than 50% of such financial creditors. This principle however would not be applicable in case of voting for withdrawal of CIRP.

Amount payable to operational creditors and dissenting financial creditors

The Amendment Act provides that the operational creditors will be paid at least the amount payable to them in the event of liquidation of the corporate debtor or the amount payable to them if realisations under the resolution plan were distributed in accordance with the priority in the liquidation waterfall, whichever is higher. The Amendment Act also provides that dissenting financial creditors will be paid at least the amount payable to them under liquidation waterfall.

The foregoing provisions of the Amendment Act will also apply in cases of CIRP of corporate debtor where:

  • a resolution plan has not been approved or rejected by NCLT
  • an appeal is pending at National Company Law Appellate Tribunal or Supreme Court
  • a legal proceeding has been initiated in any court against the decision of the NCLT in respect of a resolution plan

CoC to consider manner of distribution proposed in the resolution plan

In addition to the existing requirement of approval of resolution plan after considering the feasibility and viability of the resolution plan, the Amendment Act requires that the CoC consider the manner of distribution proposed in the resolution plan by taking into account the order of priority amongst creditors, as set forth in sub-section (1) of Section 53 which relates to liquidation waterfall, including the priority and value of the security interest of a secured creditor.

Resolution plan approved by NCLT binding on the Central Government, State Government or any local authority to whom corporate debtor owes a statutory debt

The Amendment Act has amended sub-section (1) of Section 31 by way of insertion to clarify that a resolution plan approved by the NCLT is also binding on the Central Government, any State Government and any local authority to whom a corporate debtor owes a debt in respect of payment of dues arising under any law. Earlier the Code provided that the approved resolution plan was binding only on the corporate debtor and its employees, members, creditors, guaran-tors and other stakeholders involved in the resolution plan which resulted in instances where the Government followed up for the balance dues after approval of resolution plan.

Liquidation after constitution of CoC

The Amendment Act clarifies by way of an explanation, under sub-section (2) of Section 33 which deals with liquidation, that the committee of creditors may take the decision to liquidate the corporate debtor any time after the constitution of the committee of creditors until the confirmation of the resolution plan, including at any time before the preparation of the information memorandum. The foregoing amendment is relevant as there have been instances where NCLTs have insisted that a liquidation order may be passed only after failure of the CIRP even though an early liquidation would have resulted in value maximization.

DMD Advocates is a leading full-service law firm with expertise in litigation, corporate, taxation, regulatory and intellectual property rights. The firm has a pan-India presence with principal offices in Delhi and Mumbai and associated offices in Bangalore, Chennai, Hyderabad, Cochin and Bhubanes-war.

DISCLAIMER: The views and opinions expressed in this article are those of the author and does not constitute a legal opinion/advice by DMD Advocates. The information provided through this article is not intended to create any attorney-client relationship between DMD Advocates and the reader and, is not meant for advertising the services of DMD Advocates or for soliciting work by DMD Advocates. DMD Advocates does not warrant the accuracy and completeness of this article and, the readers are requested to seek formal legal advice prior to acting upon any information provided in this article. Further, applicable laws and regulations are dynamic and subject to change, clarification and amendment by the relevant authorities, which may impact the contents of this article. This article is the exclusive copyright of DMD Advocates and may not be circulated, reproduced or otherwise used by the intended recipient without our prior permission.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions