Executive Summary:
The Insolvency and Bankruptcy Code Amendment Act, 2020, was enacted to further amend the Insolvency and Bankruptcy Code, 2016. It received presidential assent on March 13, 2020, and is deemed to have come into force on December 28, 2019. The act introduces several amendments concerning financial creditors, corporate debtors, and resolution processes, aiming to refine and improve the insolvency resolution framework.
Key Points / Main Content:
Amendments to Section 5:
* Clause (12) proviso is omitted.
* Clause (15) is amended to include "and such other debt as may be notified."
Amendments to Section 7:
* Financial creditors under Section 21(6A)(a)(b) or real estate allottees must jointly file applications with a minimum threshold of either one hundred creditors/allottees or ten percent of the total creditors/allottees in the same class/project, whichever is less.
* Applications not admitted before the commencement of this Amendment Act must comply with the new threshold within thirty days or be deemed withdrawn.
Amendments to Section 11:
* Explanation II clarifies that the section does not prevent corporate debtors (clauses a to d) from initiating corporate insolvency resolution process against another corporate debtor.
Amendments to Section 14:
* An explanation is inserted clarifying that licenses, permits, registrations, quotas, concessions, clearances, or similar rights are not suspended or terminated due to insolvency, provided there is no default in payment of current dues during the moratorium period.
* Subsection 2A is inserted, stating that critical goods or services cannot be terminated, suspended, or interrupted during the moratorium, unless dues are not paid during the moratorium or in specified circumstances.
* Clause (3)(a) is substituted to include transactions, agreements, or other arrangements notified by the Central Government in consultation with any financial sector regulator or any other authority.
Amendments to Section 16:
* The words "within fourteen days from the insolvency commencement date" are substituted with "on the insolvency commencement date."
Amendments to Section 21:
* The second proviso includes "or completion of such transactions as may be prescribed," after "convertible into equity shares."
Amendments to Section 23:
* The resolution professional continues to manage operations after the corporate insolvency resolution process period until an order approving the resolution plan or appointing a liquidator is passed.
Amendments to Section 29A:
* Clauses (c) and (j) include "or completion of such transactions as may be prescribed," after "convertible into equity shares."
Insertion of Section 32A:
* Liability for prior offences of a corporate debtor ceases upon approval of a resolution plan under Section 31 if the plan results in a change of management or control to a person not a promoter, related party, or one believed to have abetted the offence.
* No action can be taken against the corporate debtor's property covered under an approved resolution plan or sale of liquidation assets to a person not a promoter, related party, or one believed to have abetted the offence.
Amendments to Section 227:
* The words "examined in this Code" are substituted with "contained in this Code".
* An explanation is inserted clarifying that insolvency and liquidation proceedings for financial service providers may be conducted with prescribed modifications.
Amendments to Section 239:
* New clauses (fa), (fb), and (fc) are inserted relating to transactions under specified provisos and explanations in Sections 21 and 29A.
Amendments to Section 240:
* A new clause (ia) is inserted regarding circumstances for termination, suspension, or interruption of critical goods or services during the moratorium period.
Repeal and Savings:
* The Insolvency and Bankruptcy Code Amendment Ordinance, 2019, is repealed.
* Actions taken under the Ordinance are deemed to have been taken under the corresponding provisions of the Code, as amended by this Act.
Impact Analysis:
Financial Creditors/Real Estate Allottees:
* Impact: Stricter requirements for initiating corporate insolvency resolution processes, including minimum thresholds for joint applications.
* Action Required: Ensure compliance with the new threshold requirements when filing applications. Modify existing applications to comply within thirty days.
Corporate Debtors:
* Impact: Clarification on initiating insolvency proceedings against other corporate debtors and potential cessation of liability for prior offenses under specific conditions.
* Action Required: Understand the implications of the amendments on initiating insolvency proceedings and potential relief from prior offences.
Resolution Professionals:
* Impact: Continued management of corporate debtor operations after the corporate insolvency resolution process period until an order is passed.
* Action Required: Continue managing operations as required until further orders from the Adjudicating Authority.
Central Government/Sectoral Regulators:
* Impact: Expanded role in notifying transactions, agreements, or arrangements under Section 14.
* Action Required: Collaborate in defining and notifying relevant transactions, agreements, or arrangements.
Insolvency Professionals and other stakeholders involved in the CIR process:
* Impact: The transactions under the second proviso to subsection 2 of section 21; fb the transactions under Explanation I to clause c of section 29A; fc the transactions under the second proviso to clause j of section 29A;
* Action Required: New clauses (fa), (fb), and (fc) are inserted relating to transactions under specified provisos and explanations in Sections 21 and 29A.
Key Entities Referenced
The Insolvency and Bankruptcy Code Amendment Act, 2020: The title of the Act being analyzed, which amends the Insolvency and Bankruptcy Code, 2016.
Insolvency and Bankruptcy Code, 2016: The principal Act that is being amended by The Insolvency and Bankruptcy Code Amendment Act, 2020.
Parliament: The legislative body that enacted the Insolvency and Bankruptcy Code Amendment Act, 2020.
Adjudicating Authority: The authority responsible for approving resolution plans under the Insolvency and Bankruptcy Code.
New Delhi: The city where the Ministry of Law and Justice is located and from where the Act was published.
Ministry of Law and Justice: The government ministry responsible for the legislative department and publishing the Act.
Dr. G. Narayana Raju: Secretary to the Government of India.
Limited Liability Partnership Act, 2008: An act of Parliament in India which introduced and regulates limited liability partnerships in India.
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MINISTRY OF LAW AND JUSTICE
(Legislative Department)
New Delhi, the 13th March, 2020/Phalguna 23, 1941 (Saka)
The following Act of Parliament received the assent of the President on the
13th March, 2020, and is hereby published for general information:—
THE INSOLVENCY AND BANKRUPTCY CODE
(AMENDMENT) ACT, 2020
NO. 1 OF 2020
[13th March, 2020.]
An Act further to amend the Insolvency and Bankruptcy Code, 2016.
BE it enacted by Parliament in the Seventy-first Year of the Republic of India as
follows:—
1. (1) This Act may be called the Insolvency and Bankruptcy Code (Amendment) Short title and
Act, 2020. commencement.
(2) It shall be deemed to have come in force on the 28th day of December, 2019.2 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Amendment 2. In section 5 of the Insolvency and Bankruptcy Code, 2016 (hereafter referred to as 31 of 2016.
of section 5. the principal Act),—
(i) in clause (12), the proviso shall be omitted;
(ii) in clause (15), after the words "during the insolvency resolution process
period" occurring at the end, the words "and such other debt as may be notified" shall
be inserted.
Amendment 3. In section 7 of the principal Act, in sub-section (1), before the Explanation, the
of section 7.
following provisos shall be inserted, namely:—
"Provided that for the financial creditors, referred to in clauses (a) and (b) of
sub-section (6A) of section 21, an application for initiating corporate insolvency
resolution process against the corporate debtor shall be filed jointly by not less than
one hundred of such creditors in the same class or not less than ten per cent. of the
total number of such creditors in the same class, whichever is less:
Provided further that for financial creditors who are allottees under a real estate
project, an application for initiating corporate insolvency resolution process against
the corporate debtor shall be filed jointly by not less than one hundred of such
allottees under the same real estate project or not less than ten per cent. of the total
number of such allottees under the same real estate project, whichever is less:
Provided also that where an application for initiating the corporate insolvency
resolution process against a corporate debtor has been filed by a financial creditor
referred to in the first and second provisos and has not been admitted by the
Adjudicating Authority before the commencement of the Insolvency and Bankruptcy
Code (Amendment) Act, 2020, such application shall be modified to comply with the
requirements of the first or second proviso within thirty days of the commencement
of the said Act, failing which the application shall be deemed to be withdrawn before
its admission.".
Amendment 4. In section 11 of the principal Act, the Explanation shall be numbered as
of section 11.
Explanation I and after Explanation I as so numbered, the following Explanation shall be
inserted, namely:—
"Explanation II.—For the purposes of this section, it is hereby clarified that
nothing in this section shall prevent a corporate debtor referred to in clauses (a) to (d)
from initiating corporate insolvency resolution process against another corporate
debtor.".
Amendment 5. In section 14 of the principal Act,—
of section 14.
(a) in sub-section (1), the following Explanation shall be inserted, namely:—
"Explanation.—For the purposes of this sub-section, it is hereby clarified
that notwithstanding anything contained in any other law for the time being in
force, a license, permit, registration, quota, concession, clearances or a similar
grant or right given by the Central Government, State Government, local authority,
sectoral regulator or any other authority constituted under any other law for the
time being in force, shall not be suspended or terminated on the grounds of
insolvency, subject to the condition that there is no default in payment of current
dues arising for the use or continuation of the license, permit, registration,
quota, concession, clearances or a similar grant or right during the moratorium
period;";
(b) after sub-section (2), the following sub-section shall be inserted, namely:—
"(2A) Where the interim resolution professional or resolution professional,
as the case may be, considers the supply of goods or services critical to protect
and preserve the value of the corporate debtor and manage the operations of
such corporate debtor as a going concern, then the supply of such goods orSEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 3
services shall not be terminated, suspended or interrupted during the period of
moratorium, except where such corporate debtor has not paid dues arising from
such supply during the moratorium period or in such circumstances as may be
specified.";
(c) in sub-section (3), for clause (a), the following clause shall be substituted,
namely:—
"(a) such transactions, agreements or other arrangements as may be
notified by the Central Government in consultation with any financial sector
regulator or any other authority;".
6. In section 16 of the principal Act, in sub-section (1), for the words "within fourteen Amendment
days from the insolvency commencement date", the words "on the insolvency commencement of section 16.
date" shall be substituted.
7. In section 21 of the principal Act, in sub-section (2), in the second proviso, after the Amendment
words "convertible into equity shares", the words "or completion of such transactions as of section 21.
may be prescribed," shall be inserted.
8. In section 23 of the principal Act, in sub-section (1), for the proviso, the following Amendment
proviso shall be substituted, namely:— of section 23.
"Provided that the resolution professional shall continue to manage the
operations of the corporate debtor after the expiry of the corporate insolvency resolution
process period, until an order approving the resolution plan under sub-section (1) of
section 31 or appointing a liquidator under section 34 is passed by the Adjudicating
Authority.".
9. In section 29A of the principal Act,— Amendment of
section 29A.
(i) in clause (c), in the second proviso, in Explanation I, after the words,
"convertible into equity shares", the words "or completion of such transactions as
may be prescribed," shall be inserted;
(ii) in clause (j), in Explanation I, in the second proviso, after the words
"convertible into equity shares", the words "or completion of such transactions as
may be prescribed," shall be inserted.
10. After section 32 of the principal Act, the following section shall be inserted, Insertion of
namely:— new section
32A.
"32A. (1) Notwithstanding anything to the contrary contained in this Code or Liability for
any other law for the time being in force, the liability of a corporate debtor for an prior offences,
etc.
offence committed prior to the commencement of the corporate insolvency resolution
process shall cease, and the corporate debtor shall not be prosecuted for such an
offence from the date the resolution plan has been approved by the Adjudicating
Authority under section 31, if the resolution plan results in the change in the
management or control of the corporate debtor to a person who was not—
(a) a promoter or in the management or control of the corporate debtor or
a related party of such a person; or
(b) a person with regard to whom the relevant investigating authority has,
on the basis of material in its possession, reason to believe that he had abetted
or conspired for the commission of the offence, and has submitted or filed a
report or a complaint to the relevant statutory authority or Court:
Provided that if a prosecution had been instituted during the corporate
insolvency resolution process against such corporate debtor, it shall stand
discharged from the date of approval of the resolution plan subject to
requirements of this sub-section having been fulfilled:4 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Provided further that every person who was a "designated partner" as
defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008, or 6 of 2009.
an "officer who is in default", as defined in clause (60) of section 2 of the
Companies Act, 2013, or was in any manner incharge of, or responsible to the 18 of 2013.
corporate debtor for the conduct of its business or associated with the corporate
debtor in any manner and who was directly or indirectly involved in the
commission of such offence as per the report submitted or complaint filed by the
investigating authority, shall continue to be liable to be prosecuted and punished
for such an offence committed by the corporate debtor notwithstanding that the
corporate debtor's liability has ceased under this sub-section.
(2) No action shall be taken against the property of the corporate debtor in
relation to an offence committed prior to the commencement of the corporate insolvency
resolution process of the corporate debtor, where such property is covered under a
resolution plan approved by the Adjudicating Authority under section 31, which
results in the change in control of the corporate debtor to a person, or sale of liquidation
assets under the provisions of Chapter III of Part II of this Code to a person, who was
not—
(i) a promoter or in the management or control of the corporate debtor or
a related party of such a person; or
(ii) a person with regard to whom the relevant investigating authority has,
on the basis of material in its possession reason to believe that he had abetted
or conspired for the commission of the offence, and has submitted or filed a
report or a complaint to the relevant statutory authority or Court.
Explanation.—For the purposes of this sub-section, it is hereby clarified
that,—
(i) an action against the property of the corporate debtor in relation
to an offence shall include the attachment, seizure, retention or confiscation
of such property under such law as may be applicable to the corporate
debtor;
(ii) nothing in this sub-section shall be construed to bar an action
against the property of any person, other than the corporate debtor or a
person who has acquired such property through corporate insolvency
resolution process or liquidation process under this Code and fulfils the
requirements specified in this section, against whom such an action may
be taken under such law as may be applicable.
(3) Subject to the provisions contained in sub-sections (1) and (2), and
notwithstanding the immunity given in this section, the corporate debtor and any
person who may be required to provide assistance under such law as may be applicable
to such corporate debtor or person, shall extend all assistance and co-operation to
any authority investigating an offence committed prior to the commencement of the
corporate insolvency resolution process.".
Amendment of 11. In section 227 of the principal Act,—
section 227.
(i) for the words "examined in this Code", the words "contained in this Code"
shall be substituted;
(ii) the following Explanation shall be inserted, namely:—
"Explanation.—For the removal of doubts, it is hereby clarified that the
insolvency and liquidation proceedings for financial service providers or categories
of financial service providers may be conducted with such modifications and in such
manner as may be prescribed.".SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 5
12. In section 239 of the principal Act, in sub-section (2), after clause (f), the following Amendment of
clauses shall be inserted, namely:— section 239.
"(fa) the transactions under the second proviso to sub-section (2) of section 21;
(fb) the transactions under Explanation I to clause (c) of section 29A;
(fc) the transactions under the second proviso to clause (j) of
section 29A;".
13. In section 240 of the principal Act, in sub-section (2), after clause (i), the following Amendment of
clause shall be inserted, namely:— section 240.
"(ia) circumstances in which supply of critical goods or services may be
terminated, suspended or interrupted during the period of moratorium under
sub-section (2A) of section 14;".
Ord. 16 of 14. (1) The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 is hereby Repeal and
2019. repealed. savings.
(2) Notwithstanding such repeal, anything done or any action taken under the
31 of 2016. Insolvency and Bankruptcy Code, 2016, as amended by the said Ordinance, shall be deemed
to have been done or taken under the corresponding provisions of the said Code, as amended
by this Act.
————
DR. G. NARAYANA RAJU,
Secretary to the Govt. of India.
UPLOADED BY THE MANAGER, GOVERNMENT OF INDIA PRESS, MINTO ROAD, NEW DELHI–110002
AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS, DELHI–110054.
MGIPMRND—5889GI—13-03-2020.