Union Cabinet on 17th July 2019 approved the proposal to carry out eight amendments to the Insolvency and Bankruptcy Code, 2016. The Insolvency and Bankruptcy Code Amendment Bill, 2019 requires the approval of both the houses of Parliament. It aims to fill in the crucial gaps in the framework of CIRP to provide clarity in its implementation. Important considerations regarding the amendments of IBC (Insolvency and Bankruptcy Code Amendment Bill, 2019)

1. July 26,
2019
UNION CABINET’S APPROVAL FOR IBC AMENDMENTS,
2019
kpalegal.com/insolvency-bankruptcy-code-amendment-bill-2019/
The Union Cabinet on 17 July 2019 approved the proposal to carry out eight
amendments to the Insolvency and Bankruptcy Code, 2016. The Insolvency and
Bankruptcy Code Amendment Bill, 2019 requires the approval of both the houses of
Parliament. It aims to fill in the crucial gaps in the framework of CIRP to provide clarity in
its implementation.
Important considerations regarding the amendments of IBC
(Insolvency and Bankruptcy Code Amendment Bill, 2019) are
provided below: –
Extension of Deadline: –
Amendment focuses on extending the deadline for the completion of Corporate
Insolvency Resolution Process within a time frame of 330 days including the time spent
in litigation or judicial process The latest code provides for a time limit of 270 days.[1]
Faster Resolution of Cases: –
th
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2. The recent amendment helps free up cases of resolution process that have been stuck
for a long period of time for various reasons and focuses on timely admission of
applications as well.
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Extended Powers to COC and Distribution of Claims: –
The amendment extends the power of the Committee of Creditors by allowing them to
decide how claims will be distributed on the basis of commercial consideration. The code
will provide some flexibility in deciding the sharing pattern among stakeholders as long
as the mandatory provisions are duly complied with.
As per the code, Financial creditors have a priority over operational creditors in case of
distribution under a resolution plan. As of now, there is no clarity on distribution to
creditors other than the financial and operational creditors.
Proposed amendment of IBC (Insolvency and Bankruptcy Code) will make it clear that
creditors must be entitled to receive at least as much of the proceeds of a successful
resolution plan as they would if the proceeds were distributed according to the priority
of payments during the liquidation of a company.[2]
Voting by Trustees
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The amendment aims to provide for the voting rights to the trustees who are appointed
as representatives by financial creditors.
Also, votes of trustees will be casted according to the highest voting share of financial
creditors. “If a trustee has an approval of 50% or more of the debenture holders by value,
he can vote at a CoC meeting on the basis of instructions given by the debenture
holders.”[3]
Liquidation: –
The CoC may decide to liquidate a corporate debtor any time after the constitution of
CoC and before the preparation of information memorandum.[4]
Resolution is Binding: –
One of the key amendment is that the bankruptcy resolution or liquidation under IBC is
binding on all stakeholders including central, state and local governments, in order to
prevent the state authorities such as income tax officials from questioning a rescue plan
adopted in a court-monitored process.[5]
Boost to Homebuyers: –
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3. Since a long period of time, homebuyers have filed cases against the builders for non-
delivery of flats. Proposed amendment will ensure that majority of votes from creditors
such as home buyers will be counted as a 100% vote of creditors in favor of or against a
resolution plan.
For example, if out of 100 home buyers, half or more of them vote to back a resolution
plan, then all of them would be considered to have voted for it.
[1] https://ibbi.gov.in/uploads/whatsnew/press_release_of_IBC_Code-1.pdf
[2]https://economictimes.indiatimes.com/news/economy/policy/government-approves-
7-amendments-to-insolvency-law/articleshow/70260805.cms
[3]https://www.bloombergquint.com/law-and-policy/ibc-amendment-bill-cabinet-
approves-changes-to-insolvency-code-to-give-coc-more-powers-extend-deadline
[4] https://ibbi.gov.in/uploads/whatsnew/press_release_of_IBC_Code-1.pdf
[5] https://www.livemint.com/
https://youtu.be/IzYgCZziTzA
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