THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) BILL,2019
One of the biggest insolvency reforms in India was brought by The Insolvency and Bankruptcy Code 2016. Prior to that code there was no such code , all we had was scattered laws for the insolvency and bankruptcy with ineffective and delayed results. There are many objectives of the Insolvency and Bankruptcy Code ,2016 basically for strengthening and amending all the existing insolvency laws in the country, promoting the entrepreneurship ,protecting the interest of the creditors and giving them the necessary relief etc. The Insolvency and Bankruptcy Code (Amendment) Bill,2019 grabbed the attention countrywide when it was introduced by Nirmala Sitharaman (Minister of Finance) on 24th july,2019. This amendment was made with an aim to amend the Insolvency and Bankruptcy Code,2016 and to introduce the new ideas for making the insolvency resolution process more flexible. The Insolvency resolution process was made a much speedier process which used to be of 4-6 years approximately, which as of now went down to 317days. A speedy process i.e. a time-bound process was introduced for resolving the insolvency in companies and amongst individuals. But the situation is slightly different from the earlier as now the responsibility to initiate the process is shifted to the creditor i.e. the creditor whenever he finds it fit can initiate the resolution process against the corporate debtor. Besides that there’s also a fresh procedure for the timely recovery procedure to be adopted by the banks, individuals and financial institutions . This aims to ease down the rough process for making it an effective and subtle process. Such new process will obviously eradicate the barriers which comes across in the pathway while the insolvency resolution and recovery process . As due to this the time period for resolution process went down along with an increase in recoveries of about 43% which was just of 22% prior to that code. There was also establishment of an Insolvency and Bankruptcy Board of India (IBBI) under this code which turned out to be a very effective board . It plays a very vital role in the overseeing the insolvency process and also provides timely guidelines .It also provides various rules and regulations like regarding the Annual report, Annual statement of accounts and Companies (Registered Valuers and Valuation ) rules, Liquidation process and Voluntary liquidation process regulations etc. It basically provides a framework upon which the companies as well as the individuals have to act upon. The Insolvency and Bankruptcy Board of India (IBBI) these days was seeking the penalization of the frivolous bidders likely engaged in the wrongful acts related to malicious initiation of insolvency proceedings, fraudulent conduct and misconduct by officer of borrower while resolution. It includes the penalties ranging from imprisonment from a year to five years and fines which may be extended up to Rupees 1crore. It is believed by many that the penalization will act as a deterrent and will improve the present scenario of the country. Although it has been a very debatable issue since past 2-3 months. Besides that to protect the interest of creditors there’s also many circumstances which have been looked upon like in case of class of creditors i.e. when the debt is owed to creditors beyond a specified number those financial creditors are meant to be represented by an authorized representative in the committee of creditors. The authorized representative of creditors will act upon the instructions received by him from the financial creditors. The authorized representative cannot take the decisions solely according to his desires but have to look upon the opinions of other creditors and act as per the instructions accordingly to exercise his right of vote. A resolution plan also exists which states the operational creditors must not receive an amount lesser than what could’ve been received at the instance of liquidation process i.e. a minimum pay-outs has been specified for the operational creditors .With such changes and improvements the realization by the creditors has improved in the resolution cases. It is also evident that the debtors now resolve at the early stage as compared to the past situations. There’s many landmark judgments which has provided an improved vision for an effective Insolvency and bankruptcy Code in the country , a few of them include: Akshay jhunjhunwala & Anr. v. Union of India & Ors., in this case the classification of creditor of the company as secured , unsecured and statutory creditor was replaced by the financial or operational creditor of a company in the initiation of the insolvency proceedings of company under the Insolvency and bankruptcy Code ,2016. Innoventive Industries Ltd. v. ICICI bank, it was held that if once an insolvency professional is appointed for managing the company then the ‘erstwhile directors’ (who are no longer in the management), cannot maintain appeal on the behalf of the company. Simply this judgment provides that powers of the ‘erstwhile directors’ for managing the company ceases on the appointment of insolvency professional. Swiss Ribbons Pvt. Ltd. V. Union of India, in this case a distinction between an financial creditor and operational creditor was made. Section 29A of the Insolvency and bankruptcy Code ,2016 providing ineligibility of a person to be resolution applicant was held to be valid and it was quoted that ‘If the blind lead the blind, both shall fall into the ditch ’. The differentiation between the financial debts and the operational debts ,former being the secured and later the unsecured as under section 53 of the Insolvency and bankruptcy Code, 2016 was held to be not discriminatory as these are relatively connected to the objective of the code. Suspension an Ease for debtors & tension for creditors There’s many steps which have been continuously taken by the government so as to tackle the loss during this pandemic . Various new schemes and programs are being introduced to improve the situation. But due to the rapid spread of the corona virus and lockdown countrywide the insolvency and bankruptcy law was paused i.e. there was suspension of the Indian bankruptcy code for a time period of 6months from 25th march 2020 through an ordinance promulgated by the president Ram nath kovind. The reason for the suspension of the Indian bankruptcy code was to avoid the business unnecessarily dragged into the bankruptcy courts due to closure of business amidst the lockdown and due to loss occurred by lesser sales during that pandemic. The present scenario of businesses is quite stressful and uncertain, somehow the suspension of Insolvency and bankruptcy Code will give a breather to many stressed corporate debtors but it has created a fear amongst the creditors as well that a few corporate weak debtors might misuse that for delaying and avoiding the debt payments, resulting in loss to the creditors itself. Although there’s ponderous burden on the corporate debtors as well to repay loan but equivalent fear is also there in the minds of the corporate creditors. In a nutshell, when the suspension period end the operationalization of Insolvency and bankruptcy Code should be scrupulously monetized and observed in light. There many barriers which have been faced by Insolvency and bankruptcy Code as of today such as challenges posed by promoters and operational creditors, shortages of judges in the tribunals , slow judicial processes , high cases of liquidation, due to long insolvency resolutions and recovery processes etc. , thus more changes must be introduced to eradicate such barriers and get an effective Insolvency and bankruptcy Code for the nation. The major focus shall lie on the effective and adequate running of the banking system and then on the recovery of the NPA i.e. non performing assets. References · Available at http://www.ias4sure.com/wikiias/gs2/insolvency-and-bankruptcy-code-amendment-bill-2018/ (visited on 15/07/2020) · Available at https://www.ndtv.com/business/coronavirus-impact-credit-market-worry-after-insolvency-and-bankruptcy-law-temporarily-suspended-over-virus-crisis-2244966 (visited on 15/07/2020) · Available at https://amlegals.com/five-recent-judgments-on-the-insolvency-and-bankruptcy-code-2016/ (visited on 15/07/2020)  (2018) 147 SCL 0163
 1 SCC 407 (2018)
 2019 SCC Online SC 73 Authored by: Ritika Tejpal Rayat College of Law, Punjab University.