Legal Updates & Articles

Major Reforms under the Insolvency and Bankruptcy Code (Amendment) Act, 2026

May 6, 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 received the President’s assent on 6th April 2026 and will be brought into force on dates to be notified by the Central Government. This amendment introduces far‑reaching changes to the corporate insolvency resolution process, liquidation, and creditor rights, further refining the Code based on seven years of practical experience.

Key amendments at a glance:

Registered Valuer definition (Section 3): A new clause aligns the definition of a registered valuer with the Companies Act, 2013, ensuring consistency in valuation standards.
Security interest clarity: An explanation now clarifies that a security interest arises only through an agreement between parties – not merely by operation of law.
Avoidance transactions (Section 26): Filing of applications for avoidance or fraudulent trading no longer halts the CIRP or liquidation; such proceedings can continue even after the process concludes.
Transfer of guarantor assets (New Section 28A): A creditor who has taken possession of a guarantor’s asset can, with CoC approval, permit its transfer as part of the resolution plan – subject to specific voting thresholds and conditions when the guarantor is also in distress.
Resolution plan safeguards (Section 30):
- Payment to dissenting financial creditors must now be explicitly provided for, at least equal to the liquidation value.
- The resolution plan must detail a supervisory mechanism for implementation, potentially involving a committee of the resolution professional, creditors, and the applicant.
- The CoC is required to record reasons for its approval of a plan.
Adjudicating Authority’s enhanced role (Section 31):
- A phased approval mechanism allows the NCLT to first sanction plan implementation and then approve the distribution methodology within 30 days.
- Defects in a plan can now be rectified before rejection.
- A strict 30‑day timeline for passing orders on plans (with reasons for delay).
- Licences, permits, and similar rights attached to an approved plan are protected from suspension or termination; pre‑approval claims against the corporate debtor are extinguished.
Liquidation reforms (Section 33):
- Before a liquidation order is passed, the CoC (with 66% vote) may apply to restore the CIRP – but only once and with a 120‑day deadline.
- The CoC can now decide to dissolve the corporate debtor instead of going through full liquidation.
- The Adjudicating Authority must pass a liquidation order within 30 days.
Liquidator replacement (Sections 34 & 34A): Provisions have been introduced to enable the committee of creditors to replace the liquidator.

These amendments reflect a continued effort to balance speed, creditor control, and fairness in insolvency resolution. Practitioners handling NCLT matters should carefully review the final notified provisions once they are brought into force.

Supreme Court Clarifies Scope of ‘Fraud’ under Section 447 of Companies Act, 2013

October 8, 2023

In a significant ruling delivered on 8th September 2023, the Supreme Court of India examined the essential ingredients required to establish “fraud” under Section 447 of the Companies Act, 2013. The case – Serious Fraud Investigation Office (SFIO) v. Nittin Johari & Anr. (Criminal Appeal No. 2781/2023) – clarified the mens rea requirement and the standard of proof at the pre‑charge stage.

Key observations:

The court held that mere regulatory non‑compliance or accounting errors do not automatically amount to “fraud”. There must be intent to deceive or knowledge of falsity.
For the prosecution to survive a discharge application, the SFIO must place prima facie evidence of such intent – a mere suspicion is insufficient.
The judgment reiterated that the term “fraud” under Section 447 has a specific criminal connotation and cannot be equated with irregularities under the accounting standards or SEBI regulations.
Directors and officers can only be held liable if they were knowingly involved in the fraudulent conduct; vicarious liability does not apply unless the statute explicitly provides for it.

This ruling is a welcome relief for corporate professionals who often face investigations for technical lapses. It underscores the need for a thorough, evidence‑based approach before initiating prosecution for serious fraud.

Key Changes Introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2023

September 11, 2023

The Insolvency and Bankruptcy Code (Amendment) Act, 2023 received the President’s assent on 11th August 2023 and was published in the Gazette of India the same day. This amendment brings significant changes that directly impact corporate insolvency resolution, especially for MSMEs and real estate projects.

Major highlights:

Pre‑packaged insolvency for MSMEs: The amendment formalises a debtor‑initiated pre‑pack process, allowing small businesses to restructure with minimal court intervention while keeping management in control.
Treatment of homebuyers: Allottees of real estate projects are now explicitly treated as financial creditors under Section 5(8)(f), resolving earlier ambiguity.
Streamlined CIRP timelines: New deadlines for certain procedural steps and a relaxation of the 330‑day outer limit in specific circumstances.
Enhanced powers of the Committee of Creditors (CoC): The CoC can now approve certain resolution plan modifications without requiring a fresh vote.

These changes aim to reduce the burden on the NCLT and speed up resolutions, particularly for smaller firms. Practitioners dealing with IBC matters should carefully review the amended sections, especially the newly inserted Chapter IV‑A (Pre‑packaged Insolvency Resolution Process).

MCA Extends Fraud Provisions of Companies Act to Limited Liability Partnerships

September 30, 2022

Through notification G.S.R. 639(E) dated 31st August 2022, the Ministry of Corporate Affairs exercised its powers under Section 30(2) of the Limited Liability Partnership Act, 2008 to extend certain provisions of the Companies Act, 2013 to LLPs. One of the most impactful extensions was Section 447, which deals with punishment for fraud.

What this means for LLPs and their partners:

Any act of fraud committed by an LLP or its partners is now punishable with imprisonment (minimum six months to ten years) and a fine, mirroring the penalties under the Companies Act.
“Fraud” is defined broadly under the Companies Act, and now that definition applies equally to LLPs – covering false statements, concealment of facts, and any act intended to deceive or gain undue advantage.
Designated partners and other officers of the LLP can be held criminally liable if they were aware of the fraudulent conduct and failed to prevent it.
The extension applies retrospectively to any fraud discovered after the notification came into effect, regardless of when the act occurred.

This move closes a long‑standing regulatory gap. Previously, LLPs were not subject to the same stringent fraud‑related penalties as companies, even though many large professional firms operate as LLPs. With this notification, investigators now have the same tools to prosecute fraudulent LLPs as they do for companies.

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