Key Introductions: The Insolvency And Bankruptcy Code (Second Amendment) Bill, 2019



The Insolvency and Bankruptcy Code, 2016 (“Code”) was enacted to enable Indian creditors to avail quick relief and to give defaulting companies another opportunity to restructure rather than outright winding up. Pre-enactment of the Code, insolvency, and bankruptcy was dealt in piece-meals by various statutes like the Companies Act, 2013, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Recovery of Debt Due to Banks and Financial Institutions Act, 1993, etc. creating rampant confusion.

Resultantly, as per the data available with the World Bank in 2016, insolvency resolution in India took 4.3 years on an average, which was much higher when compared with the United Kingdom (1 year), USA (1.5 years) and South Africa (2 years).[1]

Considering that the Code, is still at nascent stages of implementation various situations arose that didn’t fall within the ambit of the Code. Judicial decisions came to the Indian economy’s rescue and helped combat the economic peculiarities that arose. Specifically, with regard to this statute, the Parliament has been pro-active to accommodate the different situations. Considering the rather asymmetrical growth, the Second Amendment Bill, 2019 is a welcoming change that addresses various idiosyncrasies within the Act itself.

Details of proposal

The Amendment Bill seeks to amend sections 5(12), 5(15), 7, 11, 14, 16(1), 21(2), 23(1), 29A, 227, 239, 240 and insert new section 32A in the Insolvency and Bankruptcy Code, 2016 (Code)[2] 

Key Amendments     
  1. Ever since the Apex Court through its judgment in Pioneer Urban Land and Infrastructure Limited vs. Union of India[3] brought ‘home buyers’ under the ambit of ‘financial creditors’ the NCLT benches adjudicated several frivolous petitions slowing down the real estate sector. Thus, as a corrective measure by way of the Second Amendment bill, it is a mandate that an insolvency application pertaining to real estate must be filed by a minimum of 100 allottees or not less than 10% of the total number of allottees, whichever is lesser.
  2. Section 11 of the Code lists out the person not entitled to make applications which include:
  3. corporate debtors who are undergoing an insolvency resolution process.
  4. corporate debtors having completed the resolution process 12 months before making the application.
  5. corporate debtors or financial creditors who have violated terms of the resolution plan, or
  6. corporate debtors in respect of whom a liquidation order has been passed.

But questions like, “can a corporate debtor initiate corporate insolvency proceedings against another corporate debtor?” lingered unanswered. Many such anomalies arose in cases like Mandhana Industries Ltd. v. Instyle Exports Pvt. Ltd.[4] and S.K. Plumbing Pvt. Ltd. v. IL& FS Engineering & Construction Co. Ltd.[5]

Thankfully now, by insertion of a second explanation to Section 11, it is now clear that “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.[6]

  • Further, by insertion of Section 32A, the bill aims to exempt corporate debtors from being prosecuted for offenses committed prior to commencement of the Act (if a resolution plan results in change in the management or control of the corporate debtor to a person who was not a promoter or in the management or control of the corporate debtor or a related party of such a person). Additionally, the Bill also accounts for immunity from attachment, confiscation, seizure, etc. of the property belonging to the corporate debtor in relation to such offenses. However, any person in charge of the corporate debtor, or associated with it, will continue to be held liable for such offenses.
  • Being a relief oriented legislation, by insertion of Explanation to Section 14 of the Act, the Bill safeguards the corporate debtor from suspension and termination of its license, permits, registrations, quota, concession, clearance or similar grant during a moratorium, unless the corporate debtor makes default in payments towards such grants. This introduction is in a spirit of the Act to enable the corporate debtor to continue as a going concern even after initiation of insolvency proceedings


The Secondment Amendment Bill, 2019 is a pro-active initiative by the legislature to deal with the ever-changing economic situations and to address the anomalies that arise with it. However, while the Union Cabinet chaired by the Prime Minister Narendra Modi has approved the proposal to make amendments in the Insolvency and Bankruptcy Code, 2016 (code), through the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019[7] its impact is yet to be seen.




[1] Innoventive Industries Ltd. v. ICICI Bank & Ors. AIR2017SC4084

[2] (last accessed on December 26, 2019, 22:55 IST)

[4] Company Appeal (AT) (Insolvency)No. 642 of 2018

[5] Company Appeal (AT) (Insolvency)No. 238 of 2018

[6] (last accessed on December 26,23:38 IST)

[7] (last accessed on December 27,00:10 IST)


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