CRYTICAL ANALYSIS OF THE INSOLVENCY & BANKRUPTCY CODE (AMENDMENT) ORDINANCE, 2020
Author: Parth Bindal, IV year of B.B.A.,LL.B from School of Law, UPES.
Co-author: Devanshu Agarwal, IV year of B.B.A.,LL.B from School of Law, UPES.
When the Insolvency and Bankruptcy Code, 2016, was introduced in India, it was introduced with the intention of correcting the numerous 'ills' sustained by the prior laws by diverting attention out from corporate debtor-in-possession framework, pervasive with in former laws, to a system in which both corporate creditor & corporate debtor function inside a structure of fairness and equity to all stakeholders to safeguard the Company's value.
The Insolvency & Bankruptcy Code (Amendment) Ordinance, 2020, however, dealt a significant blow to the purpose for which this code was introduced by suspending important provisions (like suspension of initiation of CIRP) enumerated under the provisions of the code that were meant for corporate creditor during the time of Covid-19. The most concerning aspect was that the suspension of certain provisions through that ordinance was meant for all companies, regardless of whether such default of the company was “covid-triggered” or not. The suspension of certain important provisions of IBC caused by the said ordinance, favoured corporate debtor and left corporate creditor in the dust, with no provision in the ordinance to protect their interest. Everyone was affected by this pandemic as it was not like that corporate creditor was immune to this pandemic.
The paper would go on to discuss how legislation failed to draw a line between companies suffered from default as a result of the pandemic and vice -versa. This paper would also analyse the pros and cons of the said ordinance in terms of its overall impact on corporate creditor and corporate debtor, as well as what other alternatives/remedies the government could rely on, and in doing so, the measures taken up by other countries would also be taken into account, so that in the future, these important provisions as enumerated in the code do not have to be suspended, so that both corporate creditor and corporate debtor are in an equivalence, as, they were not, during Covid-19, due to the said ordinance.
Keywords- Blanket, Covid-triggered, Corporate Creditor, Corporate Debtor, Corporate Entity, Default, favoured, Suspension.
The IBC was introduced in 2016, primarily to shorten the resolution time and keep the defaulting corporate entity as a "going concern," & to consolidate & amend insolvency and bankruptcy provisions that were scattered across various statutes into one place. The Bankruptcy Law Reform Committee, the driving force behind the creation of the IBC, broadly stated three parameters under which the IBC would operate, which are as follows1.-
Low recovery loss.
Increased debt financing throughout a broad range of debt instruments.
The objectives discussed above were the result of loopholes in previous statutes that favoured debtors, and the primary reason for this impression is that the debtor retained control over the management of the corporate entity even during insolvency proceedings. To eliminate the same, code addresses this issue by transferring Company management to the resolution professional.
In past few years, IBC has been subjected to modification as a result of the huge external downturn induced by COVID-19 pandemic, that has plunged the financial system, the severity of which has been mirrored by fact that this is regarded as biggest crisis ever since World War II, as remarked by World Bank through its June 2020 Global Economic Prospects2. But through these recent amendments in IBC it seems that the things are going back to pre-IBC era with the implementation of the said ordinance3.
Primarily, the priority in enacting sec. 10A under the said ordinance is to grant some reprieve to companies. Sec. 10A places a restriction on IBC’s sec. 74, 95, & 106. Sec. 7 provide for financial creditors to file an application for insolvency proceedings, Sec. 9 provides for operational creditors to file an application for insolvency proceedings, and Sec. 10 provides for the corporate debtor to file an application for insolvency proceedings. The ordinance also halt the resolution professional's filing of an application in accordance with Sec. 66(2) of the Code. Even though the dismissal of such provisions provides a reprieve for companies that are afraid of it being pulled in to the NCLT, the alteration will result in a difficult period for creditors.
The Central Government made the said alteration to assist small entrepreneurs & MSMEs who may be negatively affected by pandemic and who are more likely to go out of business during lockdown time frame. This is indeed a good step but what about the rights afforded to creditors under sec. 77 & 98 to initiate insolvency proceedings would be revoked.
The above is a big blow to the IBC's creditor in control regime, which was vital to its success. Such changes made could have the inverse result, and we'll be returned to just a debtor-in-control regime. It will compel creditors to admit the unjustified requirements of corporate debtors, putting those inside an unfair situation. According to the Bankruptcy Law Reforms Committee report, the objective of bankruptcy reforms would be to prevent issues during severe downswings inside the business cycle.9 However, the blanket suspension of IBC has hampered the route to improved insolvency results.
The above modifications i.e. suspension of certain provisions of IBC further fail to account for the possibility that certain financiers, respectively financial & operational creditors, will not be able to absorb the consequences of a large number of bad debts. Individual operational creditors, for example, could take on the bulk of a burden if they aren't paid in time for such goods & services they do provide to companies (the majority of whom are organized, large-scale enterprises).
Likewise, numerous financial institutions already are experiencing balance-sheet stress that they are unable to absorb. The utter and total denial of lenders' claim to reinstate IBC would only lengthen their challenge to impose debt and it may aggravate this same pressure upon that financial system, which was already trying to deal with substantial debt before COVID-19 affected it10.11 When certain measures have already taken to protect small corporate entities from getting into default than whether completely suspending certain provisions of IBC was required? Like, The increase in the minimum threshold for the initiation of CIRP against corporate debtors to ₹ 1 Cr from existing limit of ₹ 1L earlier under the IBC by the Ministry of Corporate Affairs, Government of India, in exercise of power conferred on it under the proviso to section 4 of the IBC, is another safeguard for small companies run by corporate debtors from the institution of CIRP by corporate creditors12 and on 12th May, 2020, the govt unveiled a new INR 20 trillion (USD 266 billion) relief package13, with particular goal of increasing financial access to SMEs and microenterprises. This contains both the RBI & fiscal policy measures announced by government.
The package contains INR 3 trillion for four-year collateral-free lending to MSMEs without any repayments for one year. This also includes INR 20 trillion in subjugated loans to assist presently stressed MSMEs, as well as INR 50 trillion in equity funds for MSMEs.14 Among these measures is a plan to bail out 2 L struggling small and medium-sized businesses15. This same package also includes things like; Companies in need of equity assistance will also have direct exposure to that of an INR 200 billion sub - ordinate debt arrangement with such a provisional loan guarantee. The govt will make a contribution INR 40 billion to the said fund. The above scheme could benefit approximately 2 million businesses.16
Although if we take into account the commitment of the government in suspending sec. 717 & 918, this same decision was correct, however suspending sec.1019 will still not accomplish the objective. This effectively shuts down all avenues for corporate debtor to seek voluntary insolvency. This can also be used as a tool by willful defaulters to avoid legal consequences. It is not unreasonable to suggest that this is a two-edged weapon which corporate debtors can wield. Without a hesitation, the suspension of IBC, in conjunction with procedure of other recovery laws, would not accomplish the purpose of its suspension, however it will undoubtedly deprive both creditors as well as debtors of the benefits provided by IBC and would create problems which were being faced by stakeholders (corporate creditor) during the pre-IBC regime and ultimately the pillars (i.e. the objectives of IBC) on which IBC was introduced would collapse.
Concept of Insolvency & Bankruptcy-
Insolvency is described as "a condition which leads towards the filing of a bankruptcy petition." Whenever a corporation (individual, group, or company) is unable to pay back a loan on time, it becomes insolvent. In broad sense, it happens whenever any corporation's cash flow in is less than the cash flow out. In terms of Individual debtors it means that they are unable to repay their debts because of their income is insufficient. It thus signifies that the funds flowing into business & also its assets have been lesser than the liabilities.20
Bankruptcy isn't really synonymous with insolvency. In reality, bankruptcy happens whenever a court decides insolvency & issues order information to commence with resolution of the same. Insolvency refers to situations in which the debtor is not able to fulfil one‘s debt repayment duty. Bankruptcy is a legal process that allows an insolvent debtor to seek relief.21
The Evolution of Insolvency & Bankruptcy in India
Insolvency laws in India are based on English law. The provisions dealing with insolvency law were first found in sec. 23 & 24 of Government of India Act, 1800. A legislature was approved in 1828, which marked the start of insolvency statute in India. The said legislation was applicable to the Presidency towns of Calcutta, Bombay & Madras. The Indian Insolvency Act of 1848 established a difference respectively for traders & non-traders. Insolvency judicial power had been forwarded to High Courts, with legal authority restricted to presidency towns.22 Nevertheless, the provisions of the Indian Insolvency Act of 1848 had been discovered to be insufficient to meet evolving circumstances. The Act of 1848 had been in effect within Presidency-towns till the time Presidency-towns Insolvency Act, 1909, was enacted in 1909. The Presidency Towns Insolvency Act, 1909 was implemented to come to terms with individual & corporate insolvency & bankruptcy. The Single Judge23 of the High Court of Specific Presidency Towns, namely Bombay, Calcutta, & Madras, was given legal authority underneath this legislation24.
It must be noted that there had been not even a single statute for governing matters pertaining to insolvency throughout non-presidency regions prior to 1907 & in successive periods, to ensure that insolvency laws were all in aligned to changing circumstances, a Provincial Insolvency Act was passed in 1907 that was eventually followed & replaced by the Provincial Insolvency Act 1920. Presidency Towns Insolvency Act, 1909 & the Provincial Insolvency Act, 1920 had been codified to make sure that both Presidency towns & non-Presidency towns were coated underneath the scope of Indian insolvency laws25.
Under Art. 246 of the Indian Constitution, bankruptcy & insolvency have been outlined in Entry 9 of the Concurrent List of the 7th Schedule. So both Centre as well as the States do have legislative authority on the subject-matter pertaining to Insolvency & Bankruptcy.26 With all these authorities granted underneath the Union List, the Parliament passed the Companies Act 1956, India's first statute dealing with corporate insolvency. But even so, this same statute made no mention of corporate insolvency or bankruptcy, only mentioning was of "inability to pay debts”27. But the problem with the phrase "unable to pay its debts" was that it must be interpreted commercially as "unable to meet current demands" even if the corporation itself is solvent.28 The thing that liabilities surpass the assets is not always indicate that the corporation will be unable to pay its debts. It's possible that it'll be capable of meeting this same as they are made29.
The Companies (Amendment) Act 2003 posited numerous modifications towards the provisions of the said act, relating to insolvency. Nevertheless, because of legal obstacles, such were unable to be alerted. The new Companies Act, 2013, incorporated a no. of modifications to the corporate insolvency procedure, the majority among which could not be notified for an extended period of time. Ch. XIX of the Companies Act of 2013 dealt with the revival & rehabilitation of sick companies. The concept underneath including this chapter in company act has been to expand the scope of revitalization as well as rehabilitation mechanisms to encompass all kinds of companies, as opposed to SICA30, that really only given for rehabilitation mechanisms for "sick industrial" companies.
The current insolvency & bankruptcy legislation in India changed over the years in response to the recommendations & suggestions made by different committees formed as per the requirements. The following are a few recent and pertinent committees.
T. Tiwari Committee-
Through 1981, the RBI expressed grave concern about the blockage of large funds & NPA of sick companies that resulted in losses in production, revenue, & employment.
T. Tiwari, the chairperson of the committee, was formed to deal with it. The committee proposed the SICA, 1985 to ensure the prompt identification of sick as well as conceivably sick industrial companies, the rapid persistence of preventive & corrective metrics, as well as the regulation of such metrics. A Board for Industrial and Financial Reconstruction was formed, but it failed to achieve its goals in the long run.31
J. Eradi Committee-
J. Eradi Committee submitted its recommendations in the year 1999, which called for the establishment of a National Company Law Tribunal (NCLT) to be enmeshed of functions and authority pertaining towards the rehabilitation & revival of sick industrial enterprises. Also it recommended changes to Companies Act 1956, which were legislated and not notified. Some proposals included the incorporation of a UNCITRAL Model Law for Cross-Border Insolvency; the requirement to stimulate voluntary company winding up; as well as the inclusion of the inability to pay debts as a criterion of sickness for companies.32
N L Mitra Committee
The Advisory Panel on Bankruptcy Laws was established in 2001 underneath the directorship of Dr N L Mitra. The RBI appointed this committee that made numerous recommendations on bankruptcy law reforms, among which was the grouping of all dispersed bankruptcy laws together into completely separate code. Even so, no decision was made.33
J. J. Irani Committee
The J.J. Irani Committee Report was formed in 2005 to evaluate & re-evaluate mainly Company Law &, in particular, to create a clear structure for insolvency & restructuring procedures as per international standard. This Committee proposed amend. in laws to speed up the restructuring & liquidation process. This committee also recommended to create a unified framework for resolving corporate insolvency by a highly specialized adjudicatory authority.34
Bankruptcy Law Reforms Committee (BLRC)
The report of this committee, led by Mr. T.K. Viswanathan, was divided into two parts: The very 1st section dealt with rationale & design/recommendations, while the 2nd part had been a detailed framework of Insolvency and Bankruptcy Bill that covered all corporations. The report proposed significant modifications to the current structure. All such recommendations resulted in the coming up of IBC, 2016.35 The Code is a detailed insolvency law that applies to all corporations, partnerships, & individuals (other than financial firms).
Until recently, the process of winding up a company in India was governed by the Companies Act 1956 & was overseen by the courts. Following the passage of the Companies Act in 2013 & even the implementation of the code in 2016, the winding-up.
procedure is now overseen by the NCLT. The IBC repealed two legislative acts the Presidency Towns Insolvency Act of 1909 as well as the Provincial Insolvency Act of 1920, & amending 11 others such as SARFAESI Act, 2002, Companies Act, 2013.36
The goal of the preceding discussion was to highlight how much time and effort it took to finally come up with a code that serves as the backbone of the Indian economy, which could be assessed by the fact that until December 2021, 19,803 applications for initiation of CIRPs with a cumulative underlying default of 6.1 lakh crore had been settled prior to actually admission. In the absence of the Code, such defaults would most likely persisted for very much long periods of time, likely to result in value destruction37.
This was just one example of many that demonstrate how the IBC has contributed to the Indian economy in numerous ways since its inception in 2016. However, it appears that everything is returning to pre-IBC levels, as one can imagine how much value destruction the defaulters' underlying assets have suffered as a result of the one-year suspension of CIRP through the said ordinance. This may also be evident from the fact that the potential of something like a significant number of corporate entities defaulting despite the absence of a Covid-19 pandemic is significant, as illustrated by RBI predictions of something like a minimum of 9.9 % of accounts of scheduled banks becoming NPA in 202038.
Regulating the affairs of companies in default as a result of the pandemic would be a much better option, and the government was also providing them with various loan on credit incentives, and that too without any security in collateral and other facilities (as discussed earlier) than whether blind suspension of IBC was required at such a stage in which not only corporate entities (corporate debtor) but also financial institutions (corporate creditor) were exposed to the pandemic & why was only corporate entities (corporate debtors) protected, while financial institutions (corporate creditors) were left out?
Even if the government wants to protect corporate entities (corporate debtors) who were in default due to the pandemic, the ordinance that was promulgated should have limited itself to only those corporate entities (corporate debtors) whose default was due to the pandemic and could have left other corporate entities (corporate debtors) default not immune to the said ordinance which were in default stage or on the verge of default before the coming of the pandemic.
Before enacting the ordinance, the government could have considered the setup of other countries (or, at a later stage, could have revised its own setup) that were able to manage corporate entity (corporate debtor) default by not providing immunity to corporate entity (corporate debtor) whose default was not caused by the pandemic. The government's actions appear to indicate a lack of trust in its own corporate entities, as even after providing various incentives, the government deemed it appropriate to continue the suspension of certain important provisions of the IBC for a one-year period.
As a result, the incentives provided to corporate entities became ineffective, as the government's continued suspension of certain important provisions of the IBC even after the announcement of incentives demonstrates that the government was unsure about its own actions, and the suspension of certain important provisions resulted in how much value destruction the defaulters' underlying assets suffered that no one could tell as it is a matter of time.
WHAT LESSONS CAN BE DRAWN FROM OTHER COUNTRIES' POLICIES?
As the authors have already highlighted in the above discussions that providing benefits to corporate entities that were in default or on the verge of default, and that default was not caused by the pandemic but by mismanagement of affairs, irregularities, wrongful acts or may be because of whatsoever reason of corporate entity, was a bad decision that was caused due to blanket suspension of certain important provisions of the code through the said ordinance. Because it could have been limited to only those corporate entities that were in default due to the act of pandemic, the suspension of certain important provisions of the IBC through the said ordinance would have been justified.
Further, even after suspension of certain important provisions of the IBC through the said ordinance for initial six months (the suspension of new proceedings was originally planned to last six months, beginning March 25, 2020), the question that needs to be answered is why the government did not consider amendment in the said ordinance when the same was lengthened two times for three months respectively - once until December 24, 2020 and then again until March 24, 2021.
During the subsequent period of extension of the suspension of certain important provisions of the IBC through the said ordinance, the government may correct its previous mistake made during the initial six-month suspension by only favouring the interest of corporate debtor and making no provision for safeguarding the interest of corporate creditor, and can make this ordinance a balanced one that could protect the interests of both, i.e. of corporate debtor as well as that of corporate creditor by also referring to the set-up of other countries pertaining to the same which are discussed below:
In the aftermath of the pandemic, the Corporate Insolvency & Governance Act, 2020 (CIGA)39 became incorporated in to the UK laws at incredible speeds on June 26th, 2020. The tenacious act is praised for having drawn a sensible as well as direct link here between occurring of default and also the effect of the Covid-19 pandemic. Unlike in IBC, the CIGA envisions a momentary restriction on winding up pleas from April 27, 2020 to September 30, 2020, except if the creditor persuasively proves well before court the presence of legitimate cause to assume that corporation's incapability to settle creditors claim is not induced by Covid-19, or even the corporation could have been insolvent regardless of the financial hardships postured by this pandemic.40
Further, the connection respectively for ‘default' & 'pandemic' was strengthened even more by the formation of such a classifying fiction that underway winding up applications are void, unless it is proven that the said corporate entity would still went into insolvent regardless of the consequences of Covid-19.41
Even judicial activism of the courts in UK pertaining to the safeguarding the interest of both i.e. of corporate creditor as well as of corporate debtor was commendable as in one of the case42, J. Snowden properly examined the Govt's intension underneath recommending preventive measures during emergency aimed at preventing the passing of winding-up orders as a consequence of this pandemic, as well as critiqued the applications for a lack of evidence to what extent applicants might not be able to pay their debts as a result of Covid-19.43 Likewise, UK courts have indeed been vigorously categorizing applications to stay winding-up proceedings as 'covid-triggered' or 'non- covid-triggered'44.
If the framework pertaining to 'covid-triggered-default' or 'non-covid-triggered-default' was well drafted by the legislature in the said ordinance, the Indian Courts could also set a good precedent with the help of that said ordinance; however, due to a lack of clarity in the said ordinance, the Indian Courts confined themselves to the boundary of that ordinance only, which cost corporate creditors a lot.
Lesson for India from UK set-up is that the government could either form a committee of experts to submit its report to adjudicating authority NCLT or directly leave it to the jurisdiction of adjudicating authority NCLT to decide the same, by mentioning the details of the same in the said ordinance, that whenever a corporate creditor wants to sue a corporate debtor for a default that occurred during the pandemic, it is the corporate creditor who had to establish that there was a default and that there was no direct or indirect link between the default and the pandemic, as a result of which the corporate creditor could recover its dues from the corporate debtor if it was established before the said forum as discussed earlier. Even if we were able to do as much as the UK did, the purpose for which the said ordinance was promulgated during the pandemic could have been justified because only those corporate entities that were able to draw a nexus between default and the pandemic could have benefited from the said ordinance.
In Germany Insolvency Act not only creditors or corporate entities could file insolvency proceedings under the respective Act but under Section 15a of the German Insolvency Act the manager of insolvent companies requires to file insolvency proceedings no subsequent over 3 weeks after the date of inability to pay or over-indebtedness. Over- indebtedness is simply when the assets do not cover the liabilities. The German Parliament amended the Insolvency Act on March 25, 2020, suspending the obligation to file an insolvency proceeding as a consequence of the pandemic. It is widely assumed that when a corporate entity was solvent in Dec. 2019 but is now insolvent, the insolvency had been caused by pandemic. The insolvency administrator would be required to demonstrate that perhaps the insolvency never was caused by the pandemic.45 In India, instead of suspending Sections 7, 9, and 10 of the IBC46, which provide for financial creditors to file an application for insolvency proceedings, operational creditors to file an application for insolvency proceedings, and corporate debtors to file an application for insolvency proceedings,47 the Indian government could provide for a time frame similar to what Germany did, so that only those corporate entities could benefit whose default was covid-triggered, and by doing so, corporate entities whose default was not covid-triggered could have been prosecuted, and the value of the underlying assets held by the defaulting corporate entity could also have been saved and put to better use than before.
The Russian administration from 6 April to 6 October 2020, imposed a moratorium upon that submission of insolvency claims (the "moratorium"). The moratorium would only apply to a person if his or her major commercial activity is stipulated inside the list of industries most impacted by pandemic's repercussions (the "industry list"), or if company is on the lists of companies systemically important to the country's economy or also of strategic enterprises. This same rules didn't clearly specify whether these individuals must have (1) been impacted by pandemic's repercussions; (2) shown indications of insolvency; & (3) managed to carry out their own primary commercial
The Indian government provided economic packages (as previously discussed) to those sectors that were severely impacted by the pandemic, primarily MSME's and small businesses, and also increased the threshold limit for initiating CIRP against corporate debtors by corporate creditors from Rs. 1 crore to Rs. 1 lakh. Then, whether complete suspension of sec. 7, 9, & 10 of the code was required for those companies whose default had no direct or indirect nexus with the pandemic?
As we have seen how different countries have dealt with the situation in their respective countries, one thing that all of them had in common was that they did not make changes, modifications, or suspensions to some important provisions in their respective legislations on the spur of the moment, as India did. All of the countries discussed in this paper made amendments, modifications, or suspensions, but they did so while keeping the interests of all stakeholders in mind, unlike India, where corporate creditors were ignored as if they were immune to the pandemic.
Until and unless there is a nexus between the object for which legislation was required, i.e. "law supposed to be" and the "law what comes out," that law cannot be considered legitimate. For example, in our case, the said ordinance was enacted with the intention of protecting only those corporate entities whose default was covid-triggered, but we ended up providing immunity to those corporate entities as well.
After going over the set-up of other countries in terms of their actions in the domain of insolvency and bankruptcy during the time of the covid-19 pandemic, and after carefully examining the actions of the Indian Government, the authors propose the following:
The definition of “default” as enumerated under sec. 3 (12) of IBC, 2016 can be amended49 by adding that if any default occurred as a result of any national emergency,
48 ‘COVID-19: Insolvency Filing Moratorium in Russia | White & Case LLP’ <https://www.whitecase.com/insight- alert/covid-19-insolvency-filing-moratorium-russia> accessed 4 November 2022.
extreme emergency, or any such related thereto as declared by the Central Government, then if any corporate entity failed to pay any debt which he is obligated to pay, then only that corporate entity will get benefit (if any) as provided by the central government for that period if they can show that their default was caused as a result of that national emergency, extreme emergency, or any other related thereto declared by the Central Government, & rules and regulations to that effect, can be added under relevant provisions of the IBC, 2016. By adding this only those corporate entity who shows that there default was induced by any of the circumstances as discussed above can get immunity but rest corporate entities won’t get any kind of unnecessary immunity.
The government must issue a detailed policy to readdress the value of those key assets, securities, or other things related thereto of those corporate entities that suffered the most as a result of the suspension of certain important provisions caused by the enactment of the said ordinance. If these issues are not addressed, NPAs will escalate to the point where the government and other financial institutions will be rendered helpless. As we have already seen in the preceding discussions how NPAs can be triggered to an alarming level in the year 2020, as indicated by the RBI in its report. The government & RBI must address this issue in such a way that a situation similar to that which led to the formation of the T. Tiwari committee does not arise, because if this occurs, the purpose for which the IBC was enacted will be defeated.
The covid-19 pandemic had pushed the economies of the countries into recession, necessitating government support for the economy's pillars, of which corporate entities are one of the most important. The government's support for corporate entities can take the form of an economic package, relief from statutory obligations for the time being until the pandemic is over, or any other relief that the government deems appropriate.
In reaction to the pandemic, the Indian government enacted the said ordinance. On the surface, this ordinance appears to be something that should be cheerful, but when one digs deeper, it appears to be made in a hurried manner without a quality discussion and something that lacks
49 See sec. 3 (12) of Insolvency & Bankruptcy Code, 2016
understanding of the ill-effects of the same after implementation (ill effects on corporate creditor in our case).The legislation must be transparent and must not be made at the expense of others, as we can see in the case of the said ordinance, where the government failed to secure the interest of corporate creditors while securing the interest of corporate debtors, and even the immunity provided to corporate debtors includes those defaulters as well who were in default state, which was not covid-triggered.
This government act reminds us of the pre-IBC era, when corporate debtors were in the driver's seat and corporate creditors were in the back seat, and in order to bridge this gap, the Bankruptcy Law Reform Committee drafted the IBC with the ultimate goal of securing the interests of both corporate debtors and corporate creditors in such a way that both would remain in the front seat and drive the insolvency and bankruptcy procedure with the balance of interest which would benefit both. However, the government's act through the said ordinance has rendered the same goal ineffective. The government must learn from the mistakes made by the said ordinance and correct them in the future if a similar situation arises in the country.