The Insolvency and Bankruptcy Code (Amendment) Ordinance 2020: Need of the Hour

Author - Rajat Shandilya , Student , Faculty of Law , AMU , Aligarh .


In the current time, the entire world is going through a global pandemic. The international fraternity is going through a hard time because of the spread of the worldwide pandemic termed as the 'Corona Virus' in around more than 190 countries. Almost every government worldwide is forced to go into a phase of lockdown as a precautionary measure to control and curb the outbreak of the pandemic. In the present time, various steps are being initiated from the government's side to keep the situation under control as it is the demand of the situation. One such move is the passing of the Insolvency and Bankruptcy Code (Amendment) Ordinance 2020. THE Ordinance came into force in India on 5th June 2020 amidst the Corona Virus Pandemic to provide relief to the corporate entities in these challenging times. The said ordinance was passed with a vision to amend the Insolvency and Bankruptcy Code 2016 (IBC Code 2016) that deals with the provisions and procedures to solve Insolvency companies, firms, and independent individuals.

India's honourable president promulgated the ordinance by exercising his ordinance issuing power under Article 123 of India's constitution when either of the house the parliament is not in session. This ordinance mainly deals with suspension of filings related to Insolvency and bankruptcy filings and few relaxations from wrongful trading provisions.


Insertion Of Section 10 A which reads as

"Notwithstanding anything contained in section  7, 9 and 10, no application for initiation of corporate insolvency resolution process of the corporate debtor shall be filed, for any default arising on or after 25th  march 2020 for six months or such further period, not exceeding one year from such date, as may be notified in this behalf:

Provided that no application can ever be filed for initiation of a corporate debtor's corporate insolvency resolution process for the said default occurring during the said period.'


• No application for initiation of CIRP u/s 7, 9 and 10 of the Insolvency and Bankruptcy Code 2016.

• The provision under the said ordinance would apply to the defaults occurring on or after 25th March 2020 only.

• The said provision would not apply in the case of defaults that occurred before 25th March 2020.

Section 10(a) provides for relaxation for defaults occurring during the 'disruption period'. The disruption period starts from of 25th March 2020 (from the same date of the inception of the nationwide lockdown) and extends up to 6 months and also an important point to be taken into account here is that the total disruption period can be extended further by the due notification of the government up to maximum 1 year including to initial period of disruption. Eventually, it can be said that the total period of disruption can range from 6 months to one year according to the demand of the situation.

Any default that occurs while the mentioned disruption period is protected by virtue of this ordinance, i.e. no form of Insolvency and bankruptcy filing can be initiated against such default at any point of time in present or in future. There are specific points that should be noted here, which  are as follows:

The ban on initiating an IBC proceeding is a forever ban.The suspension is an umbrella suspension. Incorporation Of Section 66 (3) which reads as under-

"Notwithstanding anything contained in this section, no application can be filed by a resolution professional under sub-section (2), in respect of such default against which initiation of the corporate insolvency resolution process is suspended as per section 10A."

 This section provides that a resolution professional should not file an application for defaults covered under Section 66. 


Provides relaxation from unlawful trade provisions:

This section shall be read in accordance with section 66(2) only and not with section 66(1) as section 66(1) covers the is an aspect of fraudulent trading and as fraudulent trading wrong in nature ab initio so no relaxation or exemption can be provided in this regard.

Implies that there would be a bar over the resolution professional to initiate a proceeding under the purview of Section 66(2) .i.e.  Wrongful trading.

This provision provides similar relaxations as that which are already in the formulation in the United Kingdom.


1. Through this ordinance, the Threshold has been increased to 1 Crore.

2. Carve-outs under IBC available on a broader scale.

3. No relaxation from payment of interest to MSMEs for delayed payments.


The latest amendment to the IBC 2016 through this ordinance looks to be made in a hurry to have been made in haste to safeguard businesses and trade-related malpractices. On critically examining the ordinance, it can be figured out that there are a number of shortcoming and vagueness in this ordinance. Even though it makes clear it may be clear that the period of suspension begins from the inception of lockdown phase, i.e. 25th March 2020, it is silent on the issue of to taking into account the continuing defaults that may have arisen initially before the lockdown date and can be attributed to the impact of the pandemic. Likewise, certain defaults may have appeared during the lockdown period and continued beyond the period of suspension. In the second context, the words used in the ordinance can be inferred to be inclined towards or favouring the corporate debtor.

The indemnity given to debtors under the provisions of the discussed ordinance seemingly may have a counter-productive effect. There is no obligation clause in the ordinance. In the situation of not having an obligatory to show and prove a substantial and sound negative impact of the effect of the Covid19 pandemic, key position holders of various companies and corporate entities are likely to exploit the provisions of the amendment by evading their responsibilities even when a default concerned has no justifiable and reasonable link to the pandemic. The chief objective of the Insolvency and Bankruptcy Code 2016 is to make individual or make sure the resolution of debts in a specific time frame would thus be hampered. Moreover, the ordinance takes no notice of personal guarantors' predicament and still has a room for inchoation of CIRP proceedings against the personal guarantors.


In this trying time of pandemic the corporate sector has completely collapsed the corporate sector in its entirety. Many small and medium corporate entities are on the verge of getting closed down. At such a crucial juncture of time, this ordinance can be a sigh of relief for many. Nevertheless, there is always the second side of the coin. As time unfolds, the concerned segment would get to see the effect of the ordinance.


1. Rongeet Poddar and Sayak Banerjee, 'The IBC (Amendment) Ordinance, 2020: Need to Iron Out the Creases', 'India Corp Law', Published: July 2020.

2.' Khushnuma Khan', IBC Amendment Ordinance 2020-‘A Protection for All?', 'Taxsutra', Published: 16th June 2020.

3. 'Harsh Kumar', 'India: Insolvency and Bankruptcy Code (Amendment Ordinance, 2020: Is it a Step in the Right Direction Amidst COVID-19?', 'Monday', 'Published on 4th August 2020.'