THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ACT, 2026 - PART XII

Insolvency and bankruptcy Fund

Section 224 of the Code discusses about the formation of Insolvency and Bankruptcy Fund for the purposes of insolvency resolutions, liquidation and bankruptcy under the Code.  Section 224(2) of the Code prescribes the list of funds/amount to be credited in the Insolvency and Bankruptcy Fund.  The Act adds one more amount to be credited in the said Fund i.e., amounts from such other sources as may be prescribed.

Utilization of Fund 

The Act substituted a new sub section 224(3) for the existing section.  Section 224(3) provides that the sums credited to the Fund may be utilised—

• by a person who has contributed any amount to the Fund under clause (b) of sub-section (2), in the event of proceedings initiated in respect of such person under this Code before an Adjudicating Authority, by making an application to such Adjudicating Authority for withdrawal of funds not exceeding the amount contributed by it, for making payment to workmen, protecting the assets of such persons, meeting the incidental cost during the proceedings or such purposes as may be prescribed; and
• for such other purposes and in such manner as may be prescribed.

Power of Adjudicating Authority to impose penalties

Section 235A of the Code gives the powers to the Adjudicating Authority to impose penalties.  The Act proposed to substitute a new section for the existing Section 235A.  The newly substituted Section 235A provides that if a person has contravened any provision of this Code or any rules or the regulations made thereunder, the Adjudicating Authority may, on an application made by the Board or the Central Government or any person authorised by the Central Government in this behalf, impose upon such person, a penalty which shall not be less than one lakh rupees for each day during which the contravention continues, but which may extend up to-

• 3 times the amount of loss caused, or likely to have been caused, to persons concerned on account of such contravention;
• 3 times the amount of the unlawful gain made on account of such contravention,

whichever is higher.

If such loss or unlawful gain is not quantifiable, the total amount of the penalty imposed shall not exceed Rs.5 crores.  If the Adjudicating Authority is of the opinion that sufficient cause exists to do so, it may, for reasons to be recorded in writing, impose a penalty which may be less than Rs.1 lakh for each day that the failure continues.

The Explanation 1 to this section clarified that the Adjudicating Authority for the purposes of this section shall be the same as referred to in section 60 or section 179, as the case may be.

The Explanation II to this section declared that the omission of sections 74 and 76, and the amendment of this section by the Act, shall not affect-

• any prosecution instituted under these sections on and before the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 and pending immediately before such date of commencement before any court, which shall continue to be heard and disposed of by the said court as if the Insolvency and Bankruptcy Code (Amendment) Act, 2026 had not been enacted; and
• any punishment imposed under these sections on and before the date of commencement of the Act.

Power to make Rules

The Act proposed to omit Section 234 (2) (ea) of the Code which earlier, gives powers to make rules on the other costs under sub-clause (e) of clause (23C) of section 5.

The Act proposed to insert the following sub sections to section 234(2)-

• (ff) - the conditions under sub-section (1) of section 58B;
• (fg) - the fee for filing an objection under sub-section (1) of section 58C;
• (fh) - the manner and conditions under sub-section (1) of section 59A.

The Act substituted a new section for Section 234(2) (zi), which provides that the other sources of amounts to be credited to the Insolvency and Bankruptcy Fund under clause (e) of sub-section (2) of section 224.

The Act inserted two new sub sections (2) (zia) and 2(zib).  Section 234(2) (zia) provides - the purposes under clause (a) of sub-section (3) of section 224 and (zib) the other purposes and the manner under clause (b) of sub-section (3) of section 224.

The Act also proposed to insert a new section 2(zma) which provides for making rules on the manner and conditions under sub-section (1) of section 240C.

Power to make regulations

Section 240 of the Code gives the powers to the Board to make regulations.  The Act inserted new sections 240(2) (eb) and (fa).  The newly inserted section 240(2) (eb) provides for making regulations on the conditions under Explanation to clause (26) of section 5.  Section 240 (2) (fa) provides for making regulations other information under clause (e) of sub-section (3) of section 9. 

The Act substituted a new section for the existing 240(2)(h).  The newly substituted section 240(2)(h) provides for making regulations on the other document or any other information under clause (a) of sub-section (3) of section 10.

The Act inserted a new section 240(2) (ha) which provides for making regulations on the manner under Section 12A (1).

Section 240(2) (oa) newly inserted provides for making regulations on any other class or classes of creditors who may attend the meetings of committee of creditors under the proviso to sub-section (11) of section 21.

The Act also inserted a new section 240(2) (ta) which provides for making regulations on the manner and conditions under sub-section (1) of section 28A.

After inserting the new substitution of words Section 240(2)(w) provides for making regulations on  the manner of making payment of insolvency resolution process costs under clause (a),  the manner of payment of debts of operational creditors under clause (b), the manner of payment of debts of financial creditors who do not vote in favour of the resolution plan under clause (ba), the conditions and manner for constitution of a committee under clause (d) and the other requirements to which a resolution plan shall conform to under clause (f) of sub-section (2) of section 30.

The Act inserted new sections 240(2)(wb), (wc) and (wd).  The newly inserted sections provide for making regulations on-

• the form, manner and the conditions under the second proviso to sub-section (1) of section 31;
• the manner and conditions for making an application by the committee of creditors for restoring the corporate insolvency resolution process and manner and conditions for completing the restored corporate insolvency resolution process under sub-section (1A) of section 33;
• the conditions under the proviso to sub-section (2) of section 33.

The Act substituted a new section for 240(2)(x) which provides for making regulations on-

(x) the form of written consent from insolvency professional under sub-section (6) of section 34;

(xa) the fee for the conduct of the liquidation proceedings and proportion to the value of the liquidation estate assets under sub-section (8) of section 34.

Section 240(2)(xb) is newly inserted which provides for making regulations on the giving written consent under sub-section (1) of section 34A.

After incorporating the amendment Section 240(2)(y) provides for making regulations on-

• the manner of maintaining an updated list of claims of creditors under clause (a),
• the manner of evaluating the assets and property of the corporate debtor under clause (c),
• the manner of selling property in parcels under clause (f), the manner of reporting progress of the liquidation process under clause (n), and
• the other functions to be performed under clause (o), of sub-section (1) of section 35.

The Act substituted a new section for Section 240(z).  This section provides for making regulations on the manner in which the committee of creditors shall supervise the conduct of the liquidation process by the liquidator under sub-section (2) of section 35.

The Act omitted the sections 240(ze), (zf), (zg), (zl).  The Act also inserted new sections as detailed below for making regulations on-

(zja) - the period and the manner of distribution of proceeds of sale under sub-section (1) of section 53;

(zjb) the manner of determining the value of security interest under the Explanation to sub-clause (ii) of clause (b) of sub-section (1) of section 53;

(zjc) the manner in which the liquidator shall make an application to the Adjudicating Authority for the dissolution of the corporate debtor under sub-section (1) of section 54;

(zjd) the manner and conditions under sub-section (1A) of section 54;

(zje) the manner and conditions under sub-section (1B) of section 54;

The Act substituted new sections for Section 240(zk) and (zke).  The newly substituted sections provided for making regulations on-

• the manner under the proviso to sub-section (2A) of section 54;
• the information to be furnished under sub-section (3) of section 54C.

The Act inserted the following sections for making regulations on the following-

(zla) the manner under clause (a), the form and manner under clause (b), and the manner under clause (c) of sub-section (2) of section 58B;

(zlb) the period, form and manner under sub-section (4) of section 58B;

(zlc) the form and manner under sub-section (1) of section 58C;

(zld) the manner and conditions for exercising the powers and performing duties by the resolution professional under section 58E;

(zle) the form in which the report to be prepared under clause (c), the report and documents to be filed with the Board under clause (f), and such other duties to be performed under clause (g) of section 58E;

(zlf) the conditions and manner for the resolution professional to attend the meetings and exercise the right to reject under sub-section (2) and the form, manner and period under sub-section (3) of section 58F;

(zlg) the manner under the proviso to sub-section (1) of section 58G;

(zlh) the form and manner in which the resolution professional shall make public announcement under sub-section (3) of section 58G;

(zli) the manner under sub-clause (ii) of sub-section (1) of section 58H;

(zlj) the form and manner under sub-section (2) of section 58H;

(zlk) the manner under sub-section (1) of section 58-I;

(zll) the conditions and procedural requirements under sub-section (2) of section 58K.

(zma) the other conditions under clause (c) of sub-section (5A) of section 59;

(zmb) the other consequences under sub-section (5C) of section 59;

(zzsa) the manner under clause (e) of section 214;

(zzwa) the manner and period under sub-section (4) of section 215.

Electronic portal

The Act inserted new sections 240(B), 240(C) and 242(1A). 

The newly inserted section 240(B) provides for electronic portal.  This section provides that the Central Government may, by notification, provide an electronic portal and the procedures related to the insolvency and bankruptcy processes under this Code, which shall be carried out on such electronic portal.

The newly inserted section 240(c) gives powers to the Central Government to make rules for cross border insolvency.  This section provides that the Central Government may prescribe the manner and conditions for administering and conducting cross-border insolvency proceedings under this Code, including the process for recognition of proceedings, granting relief, judicial cooperation, assistance and coordination in connection with such proceedings, for such class or classes of  debtors or corporate debtors involving such countries or territories outside India, as may be notified by the Central Government in this regard.

The rules made under this section may provide that any of the provisions of this Code or the Companies Act, 2013 shall apply with such exceptions, modifications and adaptations, as may be required to administer and implement the provisions of this section and rules made thereunder, including designating one or more Benches for dealing with proceedings under this section.

A draft of every rule proposed under this section shall be laid before each House of Parliament in such manner as provided under sub-sections (4) to (6) of section 59A, which shall, mutatis mutandis apply, to the rules made under this section.

The explanation to this section provides that the expression ‘corporate debtor’ shall also include any person incorporated with limited liability outside India.

Section 242(1A) of the Code provides that if any difficulty arises in giving effect to the provisions of this Code, as amended by the Act, the Central Government may, by an order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Code, as may appear to it to be necessary or expedient for removing such difficulty. 

No such order shall be made under this section after the expiry of a period of five years from the date of commencement of the Act.