Insolvency And Bankruptcy Code (Amendment) Ordinance, 2019

  • 15 Jan 2020

  • The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 was promulgated on December 28, 2019, which amended the Insolvency and Bankruptcy Code (IBC), 2016.
  • The Amendment Act has brought amendment, omission or addition in Sections 5(12), 5(15), 7, 11, 14, 16(1), 21(2), 23(1), 29A, 227, 239, 240. It also inserted a new Section 32A in the Code.


  • To provide last mile funding to corporate debtor to prevent insolvency in case company goes into Corporate Insolvency Resolution Process (CIRP) or liquidation.
  • To provide immunity against prosecuting corporate debtor.
  • To prevent action against the property of corporate debtor or the successful resolution application subject to fulfillment of the conditions.

Key Changes Made

  • Proviso to Clause (12) of Section 5 of the Code has been omitted to clarify that the insolvency commencement date is the date on which an application for initiating Corporate Insolvency Resolution Process (CIRP) is admitted.
  • Section 7 of the Code has been amended to clarify minimum threshold for certain classes of financial creditors for initiating CIRP. It states that an application for initiating CIRP shall be filed jointly by not less than 100 of such creditors in the same class or not less than 10% of the total number of such creditors in the same class, whichever is less. For financial creditors who are allottees under a real-estate project, an application for initiating CIRP shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than 10% of the total number of such allottees under the same real estate project, whichever is less.
  • Section 11 of the Code has been amended to clarify that a corporate debtor shall not be prevented from initiating CIRP against any other corporate debtor.
  • Section 14 of the Code has been amended to put a stay on the licenses, permits, concessions, clearances, etc. of the corporation. The above cannot be terminated, suspended or not renewed on the grounds of insolvency during the moratorium period. Additionally, the supply of goods and services critical to preserve and protect the value of the corporate debtor, such supply shall not be terminated.
  • Section 16 of the Code has been amended to provide that an insolvency resolution professional should be appointed on the date of admission of the application for initiation of CIRP.
  • Section 23 of the Code has been amended to enable the resolution professional to manage the affairs of the corporate debtor during interim period between the expiry of CIRP till the appointment of a liquidator.
  • A new Section 23A has been inserted to provide that the liability of a corporate debtor for an offence committed prior to the commencement of the CIRP shall cease under certain circumstances.


  • Preventing Unnecessary Admission of Cases: The amendment brings the much awaited changes needed in the insolvency sector. It clears the air on various aspects and provides relief to both corporate debtor as well as the creditors. The thresholds introduced will prevent admission of unnecessary cases to the insolvency court.
  • Removing Bottlenecks: The move will ensure in bringing about finality to the cost and litigation risks associated with a corporate debtor thereby removing hurdles being faced in many of the high value insolvency cases. This will result in streamlining the CIRP and will pave the way for better realization of assets for all the stakeholders.
  • Safeguarding Corporate Debtor: It will help to ring-fence the corporate debtor and property from offences committed by the previous management or promoters.
  • Ease of Doing Business: The Amendment is in consonance with the government’s much celebrated aim of increasing the ease of doing business in India.
  • Boosting Bidders Confidence: By insulating the successful bidders of stressed assets from the wrongdoings of the earlier management, the ordinance aims at boosting the confidence of the potential bidders in the insolvency process.

Challenge against the Amendment

  • On 6th January, 2020, a writ petition has been filed by a group of home buyers in the Supreme Court challenging the IBC ordinance on the ground of arbitrariness.
  • The home-buyers alleged that the additions made to Section 7 regarding the requirement of minimum numbers was against fundamental rights guaranteed to the home buyers (financial creditors) under articles 14 and 21 of the Constitution as well as the very objective of the IBC.
  • The petitioner submits that the amendment ordinance is in the nature of ‘remedy with no remedy’ as it curtails the rights of an individual home buyer.
  • They also argue that the amendments discriminate between individual and corporate creditors by imposing the minimum thresholds on individuals but not on corporates, such as banks.

Way Forward

  • The Amendment focuses on a timely admission and completion of the insolvency process and has come as a much needed support for the potential buyers of stressed assets. The decision to protect third-party successful bidders from the illegalities committed by the earlier management will go a long way in restoring the spirit of the Code.