In August, 2019, to address certain urgent implementation issues in relation to rights of creditors, voting-deadlocks and delays caused by protracted proceedings under the Insolvency and Bankruptcy Code, 2016 (Code), the Parliament enacted the Insolvency and Bankruptcy Code (Amendment) Act, 2019 (Amendment Act).
Some of the important changes brought out by the Amendment Act are as follows:
(i)In order to safeguard the interests of operational creditors, the Amendment Act mandates that, under a resolution plan approved under the Code, creditors should be paid, at the least, the amount that would be due to them if the proceeds under that plan were distributed as per the order of priority of repayments applicable in a liquidation process or the liquidation value of their claims, whichever is higher.
(ii) It also clarifies the plan-related rights of financial creditors who did not vote in favour of a resolution plan approved by the committee of creditors.
(iii) To address delays caused in completing the corporate insolvency resolution process (CIRP) within the stipulated period, the Amendment Act prescribes an outer time-limit of 330 days and expressly includes the time spent in any litigation linked to the case within this period, which was found to be one of the key sources for delays. Further, the Adjudicating Authority (the National Company Law Tribunal) is also mandated to provide reasons if it fails to admit a case filed by a financial creditor within 14 days.
(iv) Due to voting dead-locks caused by large classes of creditors (such as classes of homebuyers and deposit holders) wherein individual creditors often failed to cast their votes, the Amendment Act provides that the decisions taken by the majority of such creditors who cast their votes, would be considered as the decision taken by every creditor belonging to that class, irrespective of whether such creditors actually cast their votes or not.
About the Contributors
Debanshu is one of Vidhi’s Co-Founders. He has over a decade of experience in commercial laws and the financial sector and has advised the Government of India on several legislative projects in this space. He was instrumental in advising the Government on the design and drafting of the Insolvency and Bankruptcy Code and its subsequent implementation. He has developed and curated Vidhi’s work on insolvency law, corporate law, financial regulation, and competition law and conceptualized its Bankruptcy Research Program. He has served as a member of a Government-appointed committee for operationalizing the National Company Law Tribunal and deposed before two Parliamentary committees examining financial sector legislation. He has also worked as a teaching fellow at Harvard Law School.
He is an alumnus of the Harvard Law School, the University of Oxford, and Hidayatullah National Law University. He attended Harvard as a Fulbright Scholar and was awarded the Irving Oberman Memorial Prize in Bankruptcy and the Dean’s scholar prize in Corporations. He was also awarded a Distinction for his graduate studies at Oxford. In 2017, he was selected for NYU School of Law’s Hauser Global Scholarship, which he waived. His academic work has been published in peer-reviewed journals and an edited book published by Cambridge University Press, New York. He has been consulted by and mentioned in global business publications, such as IFR Asia and The Economist. Earlier, Debanshu practiced as an M&A and regulatory lawyer with AZB & Partners at its Mumbai and New Delhi offices.
Aishwarya was a Senior Resident Fellow working in the area of Corporate Law and Financial Regulation. At Vidhi, she has primarily worked on engaged/commissioned projects from various ministries, statutory authorities and regulators, where she provides legal research and drafting support at various stages of law-making. Aishwarya works on a variety of legal and regulatory matters and allied issues in public policy, chiefly related to insolvency laws, competition laws and corporate governance laws. Aishwarya graduated with a B.A. LL.B (Hons.) from Jindal Global Law School (JGLS) in 2017. During her time there she worked on two human rights reports and attended specialised courses in Advanced Corporate Law and Competition Law. She has also interned under Senior Advocate Ramji Srinivasan, in Avantha Holdings Ltd. and in leading law firms.
Oitihjya was a Research Fellow working in the area of Corporate Law and Financial Regulation and with the Vidhi Bankruptcy Research Programme.
Manmayi is a Senior Resident Fellow working at Vidhi Karnataka. Manmayi is a graduate of the National University of Advanced Legal Studies, Kochi (2016). Prior to joining Vidhi, Manmayi worked at the law firm of Dhir & Dhir Associates, where she litigated and provided advisory services to various clients in matters pertaining to the Insolvency and Bankruptcy Code. She has also previously worked with the Centre for Law and Policy Research, where she litigated in the areas of public health, women's rights and rights of disabled.
Shreya was a Research Fellow at Vidhi.