Preliminary [Act No. 01 of 2020]

[13th March, 2020]

PREAMBLE

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:--

S.1 Short title and commencement

(1) This Act may be called the Insolvency and Bankruptcy Code (Amendment) Act, 2020.

(2) It shall be deemed to have come in force on the 28th day of December, 2019.

S.2 Amendment of section 5

In Section 5 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereafter referred to as 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.

S.3 Amendment of section 7

In Section 7 of the principal Act, in sub-Section (1), before the Explanation, the 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

S.4 Amendment of section 11

In Section 11 of the principal Act, the Explanation shall be numbered as 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.".

S.5 Amendment of section 14

In Section 14 of the principal Act,--

(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 b

S.6 Amendment of section 16

In Section 16 of the principal Act, in sub-Section (1), for the words "within fourteen days from the insolvency commencement date", the words "on the insolvency commencement date" shall be substituted.

S.7 Amendment of section 21

In Section 21 of the principal Act, in sub-Section (2), 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.

S.8 Amendment of section 23

In Section 23 of the principal Act, in sub-Section (1), for the proviso, the following proviso shall be substituted, namely:--

"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.".

S.9 Amendment of section 29A

In Section 29A of the principal Act,--

(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.

S.10 Insertion of new section 32A

After Section 32 of the principal Act, the following Section shall be inserted, namely:--

"32A. Liability for prior offences, etc

(1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an 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 m

S.11 Amendment of section 227

In Section 227 of the principal Act,--

(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.".

S.12 Amendment of section 239

In Section 239 of the principal Act, in sub-Section (2), after clause (f), the following clauses shall be inserted, namely:--

"(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;".

S.13 Amendment of section 240

In Section 240 of the principal Act, in sub-Section (2), after clause (i), the following clause shall be inserted, namely:--

"(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;".

S.14 Repeal and savings

(1) The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 (Ord. 16 of 2019) is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the Insolvency and Bankruptcy Code, 2016 (31 of 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.

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Statement Statement of Objects and Reasons -

STATEMENT OF OBJECTS AND REASONS

1. The Insolvency and Bankruptcy Code, 2016 (the Code) was enacted with a view to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order or priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India.

2. A need was felt to give the highest priority in repayment to last mile funding to corporate debtors to prevent insolvency, in case the company goes into corporate insolvency resolution process or liquidation, to prevent potential abuse of the Code by certain classes of financial creditors, to provide immunity against prosecution of the corporate debtor an