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Published on: Jun 24, 2026

Changes to Insolvency & Bankruptcy Act - COVID-19

Insolvency and Bankruptcy Bill was passed in the Lok Sabha in 2016 bringing into effect the Insolvency and Bankruptcy Code, 2016 [hereinafter referred as “The Code”]. The insolvency and bankruptcy mechanism which prevailed prior to the formation of The Code was scattered, unorganized and uncodified. The resolution of bankruptcy matters was largely contingent to the precedents set by the judiciary.  The Code lays down the following characteristics highlighted herewith:
  • The Code provides for a framework for a course of action for insolvency and liquidation for companies, individuals as well as partnerships. 
  • There is a limitation prescribed in the ambit of which the insolvency process is required to be concluded.
  • The financial creditors, operational creditors as well as the corporate debtors themselves retain the right to file an insolvency petition before the adjudication authority. 
  • All the proceedings pertaining to insolvency and bankruptcy would remain under the supervision of the Insolvency and Bankruptcy Board of India (IBBI). 
  • A licensed insolvency resolution professional would be appointed to collate data and ensure operations of the corporate debtor as a going concern. 
  • The insolvency process would be heard before an adjudicating authority. In case of corporates the National Company Law Tribunal and in case of individuals and partnerships, the Debt Recovery Tribunal would be the adjudicating authority. 
  • The Code specifies a list of individuals prohibited from furnishing the resolution plan for instance, directors who have been effectively disqualified.  
  • The process and timeline for the insolvency petition has been detailed in The Code systematically. Table 1 explains the insolvency process.  
In terms of the timeline, The Code binds the adjudicating authority to ascertain conclusion of the entire process in 330 days.  The appointment of the licensed Resolution Professional must be confirmed within 30 days of the formation of the Committee of Creditors (COC) and the process leading up to the resolution plan must be completed in 180 days with an extension of 90 days only under exceptional circumstances.  The resolution plans provided by the bidders would be scrutinized and voted upon by the Committee of Creditors. The plan that receives an approval of over or equivalent to 75% in the committee would be presented before the NCLT. Should the NCLT approve the plan, the same would be implemented and should the tribunal reject the plan, then a liquidation process is put in motion. In the present circumstances, taking into account the outbreak of COVID-19 and the lockdown, implementation of The Code on the insolvency process has been affected. The law is silent on the repercussions of execution of The Code in times of a pandemic; however, it empowers the Executive to take necessary measures in order to protect the stakeholders.  In order to curtail the damage that has been caused to the implementation of The Code due to COVID-19, the government has introduced measures and policies in the system: Increase in the threshold of the minimum amount of default: The Ministry of Corporate Affairs published a notification on 24.03.2020 [1], exercising powers as conferred by the proviso of Section 4 of The Code, increasing the minimum threshold amount for filing a petition for insolvency to INR 1 Cr. The amount as per section 4 of The Code was INR 1 lakh.  This was introduced to potentially reduce the number of fresh petitions before the tribunals amid COVID-19. However, the notification is unclear about the applicability of the increased amount in post lockdown scenario.   National Company Law Tribunal (NCLT) notification regarding COVID-19: On 22.03.2020, the NCLT issued a notification announcing shutdown of the tribunal amid COVID-19 [2]. The NCLT shut operations from 23.03.2020 until 31.03.2020, which was before the nationwide lockdown was implemented, and remains closed to date.  The notification prescribed the course of action for unavoidable urgent matters. It also recorded that matters pertaining to The Code in terms of approval of resolution plan, extension of time and liquidation would not be construed as urgent matters. Thus, in the pendency of the lockdown, the said matters would remain stagnant and would be considered once the tribunal resumed active functioning. It also put a halt on filing of any new matters pertaining to The Code.  Insertion of Regulation 40C: adjournment of activities during lockdown: The Insolvency and Bankruptcy Board of India (IBBI) issued a notification on 29.03.2020 [3], instituting a fresh regulation to Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020. The provision has been formulated under Regulation 40C which states that any activity that could not be accomplished due to the ongoing lockdown, would not be counted as a contributing factor towards the timeline for corporate insolvency resolution process. The provision essentially implies that any meetings of COC, preparation of a resolution plan and other activities that could not materialize pertaining to the insolvency process for the duration of the entire lockdown, would waive off any liability from the person(s) concerned. This means that the duration of the lockdown would not be included in the 330 days of timeline. Also, the parties involved would not be considered to have defaulted in adhering to the timeline.  Insertion of Regulation 47A: adjournment of activities during lockdown: The Insolvency and Bankruptcy Board of India (IBBI) issued another notification on 17.04.2020 [4] in which it introduced another regulation to Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2020. This regulation is similar to Regulation 40C waiving off any liability for non-completion of any activity amid lockdown for the liquidation process. The notification states that the lockdown period would not be counted towards the timeline for the liquidation process.  The ongoing pandemic has affected all aspects of the insolvency process and in reference to the analysis made above, it can be concluded that even though no one would be deemed at fault because of the delay, there is, in fact, an inevitable delay in the process. The delay, by extension, defeats one of the crucial and salient features of the Insolvency and Bankruptcy Code, 2016. However, it was critical for the measures to supervene in order to resume ordinary functioning of law and order at the earliest. 
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Frequently Asked Questions

Common questions about Insolvency & Bankruptcy Code Changes During COVID.

The Insolvency and Bankruptcy Code, 2016 is a law that provides a comprehensive framework for the resolution of insolvency and bankruptcy cases in India. It consolidates and streamlines the insolvency resolution process for companies, individuals, and partnerships under a single unified code.
Some key features of the IBC include a time-bound insolvency resolution process, the appointment of insolvency resolution professionals, the formation of a committee of creditors, and the supervision of the process by the Insolvency and Bankruptcy Board of India (IBBI). It also specifies the roles and rights of various stakeholders, such as financial creditors, operational creditors, and corporate debtors.
The COVID-19 pandemic and the subsequent lockdowns have disrupted the implementation of the IBC. The article mentions that the law is silent on the impact of a pandemic, but the government has introduced measures to address the challenges. These include increasing the minimum default threshold for filing insolvency petitions, temporary closure of the National Company Law Tribunal (NCLT), and the introduction of new regulations by the IBBI to exclude the lockdown period from the timelines for insolvency resolution and liquidation processes.
The Ministry of Corporate Affairs increased the minimum default threshold from INR 1 lakh to INR 1 crore for filing insolvency petitions. This move aimed to potentially reduce the number of fresh petitions before the tribunals during the COVID-19 situation, providing some relief to companies facing financial distress due to the pandemic.
The NCLT notification announced the temporary shutdown of the tribunal due to the COVID-19 situation. It clarified that matters related to the approval of resolution plans, extension of timelines, and liquidation proceedings under the IBC would not be considered urgent matters during the lockdown period, effectively putting them on hold until the tribunal resumes operations.
Regulation 40C, introduced by the IBBI, aims to address the impact of the lockdown on the insolvency resolution process for corporate persons. It states that any activity that could not be completed due to the lockdown will not be counted towards the timeline for the corporate insolvency resolution process, effectively excluding the lockdown period from the prescribed timelines.
Similar to Regulation 40C, Regulation 47A introduced by the IBBI excludes the lockdown period from the timeline for the liquidation process. It ensures that the parties involved in the liquidation process are not held liable for non-completion of activities during the lockdown period.
The measures introduced by the government and the IBBI aim to provide relief and flexibility to the stakeholders involved in insolvency and bankruptcy proceedings during the COVID-19 pandemic. By adjusting timelines and thresholds, these measures seek to ensure the smooth functioning of the IBC while acknowledging the exceptional circumstances caused by the pandemic.
While the article acknowledges that the measures introduced will inevitably lead to delays in the insolvency resolution process, it also recognizes that these measures were necessary to resume the ordinary functioning of law and order at the earliest. By excluding the lockdown period from the timelines, the measures aim to mitigate the impact of the delays caused by the pandemic.
The Insolvency and Bankruptcy Board of India (IBBI) is the regulatory body established under the IBC to oversee and regulate the insolvency resolution process in India. Its role includes registering and regulating insolvency professionals, monitoring the functioning of insolvency resolution processes, and providing guidance and oversight to ensure the effective implementation of the IBC.