Constitution of Bankruptcy Board and appointment of members
Enforcement of Security Bill


As part of the ongoing overhaul of India's insolvency regime, the government recently undertook two key measures:

  • It notified certain provisions of the Insolvency and Bankruptcy Code 2016 that deal with the constitution of the Insolvency and Bankruptcy Board of India, a statutory body under the code, and the appointment of its chairperson and full-time members.
  • It passed the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill 2016 in both houses of Parliament.

Constitution of Bankruptcy Board and appointment of members

As a first step towards bringing the new insolvency regime under the code into effect, by way of notifications dated August 5 2016(1) and August 19 2016(2) the government notified the provisions of the code that deal with the constitution of the Bankruptcy Board and appointment of its chairperson and other full-time members.(3)

Simultaneously, through the Ministry of Corporate Affairs, the government:

  • issued an advertisement(4) inviting applications for a chairperson and three full-time members of the Bankruptcy Board; and
  • published the draft Insolvency and Bankruptcy Board of India (Salary, Allowances and other Terms and Conditions of Service of Chairperson and Members) Rules 2016,(5) which provide terms and conditions for Bankruptcy Board members.

Enforcement of Security Bill

Both houses of Parliament passed the bill on August 1 2016 and August 9 2016, respectively. It is now pending assent from the president. The bill essentially seeks to amend the following laws in order to make them more time-sensitive and effective:

  • the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002;
  • the Recovery of Debts due to Banks and Financial Institution Act 1993;
  • the Indian Stamp Act 1899; and
  • the Depositories Act 1996.

Proposed amendments
Some of the salient features of the proposed amendments to the SARFAESI Act are as follows:

  • Under the SARFAESI Act, secured creditors can take possession over collaterals against which a loan had been provided on default in repayment with the assistance of the district magistrate, if necessary. The bill proposes that such proceedings to seek assistance from the district magistrate must be completed within 30 days.
  • The bill further empowers the district magistrate to assist banks in taking over the management of a company in cases where the bank converts its outstanding debt into equity shares with a stake of 51% or more in the company.
  • The bill seeks to create a central database to integrate property records registered under various registration systems. This includes integration of registrations made under the Companies Act 2013, the Registration Act 1908 and the Motor Vehicles Act 1988.
  • Secured creditors will not be able to take possession of collateral unless it is registered with the central registry.
  • The bill empowers the Reserve Bank of India (RBI) to audit and inspect asset reconstruction companies. The RBI may also penalise asset reconstruction companies if they fail to comply with any directions.

Recovery of Debts due to Banks and Financial Institution Act
The bill proposes the following amendments to the Recovery of Debts due to Banks and Financial Institution Act:

  • Under the act, banks and financial institutions must file cases with the debt recovery tribunal that has jurisdiction over the borrower's area of residence or business. However, the bill allows banks and financial institutions to file cases with the debt recovery tribunal that has jurisdiction over the area of the bank branch where the debt is pending.
  • The bill provides stricter timelines for completion of the procedures that debt recovery tribunals must follow during debt recovery proceedings.
  • The bill introduces electronic filing for certain pleadings and affidavits under the act, including presentation of claims by parties and summons issued by tribunals.
  • The bill increases the retirement age for presiding officers of debt recovery tribunals from 62 years to 65 years and the retirement age for debt recovery appellate tribunal chairpersons from 65 years to 67 years. It also makes presiding officers and chairpersons eligible for reappointment to their positions.

Stamp Act
The bill provides that transactions to transfer financial assets in favour of asset reconstruction companies will be exempted from stamp duty.

Depositories Act
The bill seeks to amend the Depositories Act 1996 in order to reflect the amendments proposed to the SARFAESI Act with respect to integrating property records under a central registry.

The proposed revamping of debt recovery tribunals will also benefit proceedings under the code, as debt recovery tribunals are the adjudicating authorities under the code for insolvency proceedings involving individuals and partnership firms. The bill is expected to help banks and financial institutions recover loans more effectively, encourage more asset reconstruction companies to set up business in India and revamp debt recovery tribunals.


The steps taken towards constituting the Bankruptcy Board and amending the debt recovery laws will strengthen the insolvency regime in India.

For further information on this topic please contact Jyoti Singh or Srisabari Rajan at Phoenix Legal by telephone (+91 22 4340 8500) or email ([email protected] or The Phoenix Legal website can be accessed at


(1) See

(2) See

(3) Sections 3(1), 3(5), 3(22), 3(26), 3(28), 3(37), 188 to 194, 221, 222, 225, 226, 230, 232, 233, 239(1), 239(2)(zd), 240(1), 240(2)(zt), 241 and 242 of the code.

(4) See

(5) See