In exercise of the powers conferred by the second proviso to section 4 of the Insolvency and Bankruptcy Code

## Report on Amendment to the Insolvency and Bankruptcy Code, 2016 **1. Executive Summary:** This report analyzes a notification issued by the Ministry of Corporate Affairs on April 9, 2021, amending the Insolvency and Bankruptcy Code (IBC), 2016. The amendment, enacted through the Insolvency and Bankruptcy Code Amendment Ordinance, 2021, specifically sets the minimum amount of default at ten lakh rupees for matters related to the pre-packaged insolvency resolution process (PIRP) of corporate debtors under Chapter IIIA of the Code. This change is likely intended to streamline the PIRP process, potentially by focusing it on cases involving more substantial financial defaults. **2. Introduction:** This report aims to provide a clear and concise overview of the amendment to the Insolvency and Bankruptcy Code (IBC), 2016, as detailed in the notification dated April 9, 2021. The analysis is based solely on the information presented within the provided policy text. **3. Policy Overview:** * **Amendment To:** Insolvency and Bankruptcy Code, 2016. * **Core Objective(s):** To specify the minimum amount of default for matters related to the pre-packaged insolvency resolution process (PIRP) of corporate debtors. This is based on the text stating "the Central Government hereby specifies ten lakh rupees as the minimum amount of default for the matters relating to the prepackaged insolvency resolution process of corporate debtor under Chapter IIIA of the Code." **4. Background and Rationale:** The amendment sets a threshold for the invocation of PIRP. The likely reason for this specific amendment is to filter PIRP applications, potentially focusing the process on cases where the default amount is significant enough to warrant the streamlined resolution mechanism. A minimum threshold could prevent the system from being overburdened with smaller cases. **5. Key Provisions / Changes:** * **Specific Part of Original Policy Changed:** Section 4 of the Insolvency and Bankruptcy Code, 2016, specifically the second proviso. * **New Rule/Provision:** The notification specifies that the minimum amount of default for matters relating to the pre-packaged insolvency resolution process (PIRP) of corporate debtors under Chapter IIIA of the Code is ten lakh rupees (₹1,000,000). * **Difference/Effect of Change:** Previously, the minimum amount of default for PIRP was not explicitly defined by the central government. By setting this threshold, the amendment limits the applicability of PIRP to cases exceeding this amount. This will likely reduce the number of PIRP applications filed for smaller debts, potentially leading to a more efficient resolution process for larger defaults. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders directly affected by this amendment include: * **Corporate Debtors:** Companies considering or subject to the pre-packaged insolvency resolution process under Chapter IIIA of the IBC. * **Creditors:** Financial institutions, operational creditors, and other entities with outstanding dues from corporate debtors. * **Insolvency Professionals:** Professionals involved in the PIRP process. * **National Company Law Tribunal (NCLT):** The adjudicating authority for insolvency resolution. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Ministry of Corporate Affairs is responsible for issuing the notification and overseeing the implementation of the IBC. The NCLT will likely be responsible for enforcing the ten lakh rupee threshold. * **Timelines/Procedures:** The notification is effective from the date of its publication (April 9, 2021). The NCLT will likely verify the default amount when admitting applications for PIRP. * **Amendment Specific Implementation:** Insolvency professionals and the NCLT must now ensure that any new applications for PIRP under Chapter IIIA meet the minimum default threshold of ten lakh rupees. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of this amendment is to: * **Streamline the PIRP process:** By limiting the number of PIRP applications to those involving more substantial defaults. * **Improve Efficiency:** Allowing insolvency professionals and the NCLT to focus on cases with potentially higher recovery values. * **Reduce Frivolous Applications:** Discouraging the use of PIRP for resolving smaller debts that could be addressed through other means. **9. Conclusion:** The amendment to the Insolvency and Bankruptcy Code, 2016, setting the minimum default amount for pre-packaged insolvency resolution process at ten lakh rupees, represents a targeted refinement of the IBC framework. This threshold is intended to optimize the utilization of the PIRP mechanism, ensuring that it is applied to cases where its benefits are most pronounced. This change is significant for corporate debtors, creditors, and insolvency professionals operating within the IBC ecosystem.

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