The Insolvency and Bankruptcy Code (IBC) of 2016 set up a clear process to handle situations where companies or people can’t pay their debts. It allowed banks and other lenders, called financial creditors, to start a process at the National Company Law Tribunal (NCLT). This could lead to either a plan to reorganize the debts or selling off the company’s assets. The 2019 amendment to the IBC was introduced to make this process better by fixing problems and responding to court rulings. For example, the Supreme Court in the Essar Steel case said the 330-day timeline for resolving cases was more like a suggestion than a strict rule, which caused some disagreements. This article explains the Insolvency and Bankruptcy Code (Amendment) Bill, 2019, introduced on July 24, 2019, by Finance Minister Nirmala Sitharaman in the Rajya Sabha, in a simple and clear way.
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What is the Insolvency and Bankruptcy Code Amendment 2019?
The 2019 amendment, introduced on July 24, 2019, by Finance Minister Nirmala Sitharaman, improved India’s system for handling insolvency. It fixed issues in the 2016 IBC by focusing on better protection for creditors, making the process quicker, and adding rules for individuals, especially personal guarantors.
Improvements to the Resolution Process
The amendment set a 330-day limit for finishing the Corporate Insolvency Resolution Process (CIRP), which includes time for legal proceedings. For cases that were already past 330 days when the amendment was passed, they had to be wrapped up within 90 days after it took effect. The NCLT now has to decide within 14 days if a company has failed to pay its debts, and if it can’t decide in time, it must explain why in writing to keep things clear and smooth.
Creditor Rights and Voting
People or businesses owed money, like suppliers (called operational creditors), now get paid either the amount they’d get if the company’s assets were sold off or the amount in the resolution plan, whichever is higher, following the same order as in liquidation. This applies to cases where the NCLT hasn’t approved or has rejected a plan, cases appealed to the National Company Law Appellate Tribunal (NCLAT) or Supreme Court, or cases stuck in legal disputes. Also, when creditors choose representatives to vote for them in the Committee of Creditors (CoC), those representatives vote based on what most of their creditors want, which speeds up decision-making.
Individual Insolvency
Starting December 1, 2019, the amendment allowed insolvency cases for personal guarantors—people who promise to pay a company’s debts if the company can’t. The Supreme Court supported this change, making it a step forward for handling individual insolvency, though it only covers guarantors for now.
Also read about Section 12A of IBC, 2016.
Key Changes in the Insolvency and Bankruptcy Code Amendment 2019
Here’s a simple breakdown of the main changes in the 2019 amendment, what they mean, and why they matter:
Resolution Plan Payouts
Operational creditors, like suppliers or service providers, get paid either what they would receive if the company’s assets were sold off or the amount in the resolution plan, whichever is higher. Payments follow the same priority as in liquidation. This rule applies to cases where the NCLT hasn’t approved or has rejected a plan, cases appealed to the NCLAT or Supreme Court, or cases caught up in legal disputes over NCLT decisions.
This ensures operational creditors get a fair payment, especially in complex or delayed cases, making the process fairer for them.
Time-Limit for Resolution Process
The Corporate Insolvency Resolution Process (CIRP), which handles a company’s debt issues, must be finished within 330 days, including time for legal proceedings or extensions. Cases that were already over 330 days when the amendment passed had to be resolved within 90 days after it took effect.
This aims to make the process faster and more efficient. But the Supreme Court said the 330-day limit is more like a guideline, which might lead to different outcomes in different cases.
Starting the Resolution Process
The NCLT, which deals with insolvency cases, has to decide within 14 days if a company has failed to pay its debts. If it can’t decide in time, it must write down why there’s a delay.
This speeds up the start of the insolvency process and keeps it transparent by making the NCLT explain delays, ensuring they’re accountable.
Representative Voting
When creditors pick representatives to vote for them in the Committee of Creditors (CoC), those representatives vote based on what the majority of their creditors want.
This makes decisions in the CoC quicker and ensures votes reflect what most creditors want, making the process smoother.
Insolvency for Individuals
From December 1, 2019, the amendment allowed insolvency cases for personal guarantors—people who guarantee a company’s debts. The Supreme Court supported this in the Lalit Kumar Jain v Union of India case (2021).
Special rules, called the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules 2019, were created to guide this. By March 31, 2022, 926 applications were filed, with 844 by creditors at the NCLT under sections 94 and 95 of the IBC.
This expands the IBC to include individual insolvency for guarantors, making the law more complete. It lets creditors go after guarantors, and the number of applications shows it’s being used a lot.
Find out What Insolvency is
Operational and Legal Effects
The amendment’s focus on operational creditors fixes a major issue, ensuring they get fair payments in resolution plans, especially in cases with legal complications.
The 330-day timeline, meant to speed things up, has caused debate since the Supreme Court said it’s flexible, which could lead to different results in different cases.
The personal guarantor rule, effective from December 1, 2019, is a big expansion, and the Supreme Court’s support in Lalit Kumar Jain v Union of India confirms it’s valid. By March 31, 2022, 926 applications were filed, with 908 at the NCLT and 18 at Debt Recovery Tribunals (DRT), mostly started by creditors under sections 94 and 95, showing this rule is actively used.
Purpose and Bigger Picture
The amendments aim to make the insolvency process more efficient, treat creditors fairly, and clarify timelines and steps. The 330-day limit gives some flexibility, while the focus on operational creditors ensures they’re better protected. Including personal guarantors is a step toward a fuller insolvency system, but it’s still limited to guarantors, with broader individual rules not yet fully active.
Summary
The 2019 IBC amendment is a big step in improving India’s insolvency system, balancing creditor rights, process speed, and individual insolvency rules. While it strengthens protections for operational creditors and timelines, court rulings and the limited scope for individuals show areas that need more work. As of 2025, these changes continue to shape insolvency cases, and their impact needs ongoing review.
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Insolvency and Bankruptcy Code Amendment 2019: FAQs
Q1. What is the Insolvency and Bankruptcy Code Amendment Bill 2019?
A bill introduced on July 24, 2019, to update the IBC 2016, improving creditor protections, setting a 330-day resolution timeline, and adding rules for personal guarantors.
Q2. What is the IBC Code 2019?
The IBC Amendment 2019 refers to updates to the 2016 Insolvency and Bankruptcy Code, focusing on creditor rights, process efficiency, and individual insolvency.
Q3. What is the Insolvency and Bankruptcy Code, 2016 as amended?
The IBC 2016, with updates like the 2019 amendment, offers a time-bound system to resolve company and individual insolvency, with better creditor protections and timelines.
Q4. What is the new amendment of IBC?
The 2019 amendment is the key recent update, adding a 330-day resolution limit, better payments for operational creditors, and rules for personal guarantors.
Q5. What is the latest version of the IBC?
The latest version is the IBC 2016, updated through 2020, with the 2019 amendment as a major change, effective from December 2019 for guarantors.
