Due to the rapid spread of the novel coronavirus disease (COVID-19), India was forced to suspend most of its economic activities, considerably impacted the economy. Given that, suspension of economic activities may trigger debt defaults, the Government attempted to provide various reliefs to business.

1. IBC: The Revised Threshold Pickle
Due to the rapid spread of the novel coronavirus disease (COVID-19), India was forced to suspend most of
its economic activities, considerably impacted the economy. Given that, suspension of economic activities
may trigger debt defaults, the Government attempted to provide various reliefs to businesses.
One such attempt, in the form of a delegated legislation, has been to increase the minimum threshold amount
of default, for application of the Insolvency and Bankruptcy Code, 2016 (the “Code”) on a defaulted debt of
a corporate debtor (“CD”), and the consequent, initiation of corporate resolution process (“CIRP”). In terms
of the notification dated March 24, 2020 (the “Notification”) minimum threshold has been increased from
Rs. 1,00,000 to Rs. 1,00,00,000, pursuant to the powers delegated to the Government in terms of proviso to
Section 4 of the Code.
The Pickle
The Notification does not provide a specific date for application of the revised threshold, which has created a
somewhat turbulent confusion. Broadly, there is only one question - whether increase in the threshold would
apply prospectively or retrospectively, in the context of commencement of corporate insolvency resolution
process (commonly referred to as 'admission'). The answer to this question is somewhat complicated - as the
trigger points are related to multiple factors, the cut-off date for the application of the revised threshold
would not be as simple as the date of the Notification.
The one question, whether increase in the threshold would apply prospectively or retrospectively, perhaps,
subsumes multiple questions, permutations and combinations
Prospective vs. Retrospective
The legislature has dealt with aspect of application of an amendment of a statute or repeal of a statute,
whether prospective or retrospective, in the sections 5, 6 and 6A of the General Clauses Act, 1897, which
would, normally, apply in cases where the statute itself is silent on this aspect. Broadly, the intention
indicated by sections 5, 6 and 6A, is that a statute, amendment or repeal thereof would come into force on the
date it receives the assent of the President, and would apply to cases / causes of action prospectively.
Additionally, the Apex Court, in a plethora of its judicial pronouncements has held that an amendment /
repeal shall be applicable prospectively, unless it is expressly or by necessary implication made to have a
retrospective effect, and has laid down certain parameters, which, inter alia, are:
 MCA Notification S.O. 1205(E) dated March 24, 2020

2.  Keshvan Madhava Menon v. State of Bombay (AIR 1951 SC 128), Memon Abdul v. Dy. Custodian
General (AIR 1964 SC 1256), Videocon International Ltd. v. Securities and Exchange Board of India
(AIR 2015 SC 1042), State of Bombay v. Supreme General Films Exchange Limited ((1960) 3 SCR
640), Hitendra Vishnu Thakur v. State of Maharashtra (AIR 1994 SC 2623), Trimbak Damodar
Raipurkar v. Assaram Hiraman Patil 1962 SCR Supl. (1) 700; 1966 AIR 1758 and Shri Vishwas
Bajirao Patil vs The State Of Maharashtra. (Writ Petition No. 12767 of 2015) or intention, whereas the
latter, unless such construction is textually impossible, is presumed to be prospective in its application;
1. whether a statute affects substantive rights or merely procedure. The former, is presumed to be
prospective in operation unless made retrospective, either expressly, by necessary implication
2. law relating to forum and limitation is procedural in nature, whereas law relating to right of action and
right of appeal even though remedial is substantive in nature;
3. every litigant has a vested right in substantive law but no such right exists in procedural law;
4. the time at which a right vests in the litigant, whether prior to or after the date of an amendment or
repeal.
In addition to the above, considering the aspect that the intendment of a statute is a relevant factor, perhaps,
nature of the statute would also be a relevant factor
Therefore, generally, as far as law on Prospective vs. Retrospective is concerned, it is well established that
the above mentioned factors, inter alia, would be required to be considered in order to determine the date of
application of, a statute, an amendment or repeal thereof.
Whilst, strictly, the Notification is not an amendment of the Code, in the quintessential sense, but an instance
of delegated legislation simply increasing the limits set out under section 4 of the Code, no doubt it affects
substantive rights of the stakeholders. However, even in case of delegated legislation, the Hon'ble Supreme
Court has held that change through a delegated legislation can only be prospective and not retrospective,
unless the rule making authority has been vested with the power under the statute to make rules or
amendments thereto with retrospective effect and such power has been exercised.
The Resolution (of the Pickle)
As the increase in the threshold, set out in section 4 of the Code, changes the rights of creditors, no doubt, the
Notification brings about a substantive change in the Code and not merely a procedural change. However, it
would be required to be examined whether by implication, the increase in the threshold, would apply to all
cases which are pending consideration for 'admission', otherwise heard, with orders reserved, or where
demand notice has been issued but insolvency petition not filed, etc., bearing in mind the intention of the
Code.
The Supreme Court has observed that the insolvency proceedings by nature are not adversarial to the CD and
are not recovery proceedings. It also observed that the Code is a beneficial legislation, for the benefit of the
CD, and therefore, the Code, and specifically, admission of a CD into CIRP cannot be seen from the
traditional lens of adversarial proceedings
Most judicial pronouncements, analysing Prospective vs. Retrospective, have dealt with various aspects of
application of the statute, amendment or repeal thereof, whether prospective or retrospective, generally, in
the context of statute pertaining to adversarial proceedings or revenue related proceedings and / or based on a
'cause of action'. Therefore, the yard stick applied in such cases ought not be applied in cases of 'admission'
or any other proceedings under the Code. However, having said that, the same can also not be ignored, and
certain basic principles laid down in such judicial pronouncements may be applied, purely for their
persuasive value.
When an insolvency petition is filed under the Code, the role of the adjudicating authority is, inter alia, to
identify whether the debtor has committed a 'default' in repayment of an unequivocal debt to

3. Director General of Foreign Trade and Ors. v. Kanak Exports ((2016)2 SCC 226), State of Uttar Pradesh and
Ors. v. Birla Corporation Limited (Civil Appeal Nos. 1579 and 1580 of 2019; MANU/SC/1667/2019), State
of Rajasthan and Ors. v. Basant Agrotech (India) Ltd. (AIR2014SC 487)
Swiss Ribbons v. Union of India (2019)4SCC17
the petitioning creditor. Whilst, there are various stages in which the role of the adjudicating authority is
paramount, the stages prior to the admission of a CD into CIRP are relevant, as the Notification pertains to
pre - admission scenario.
Accordingly, considering the general factors which are pertinent in the Prospective vs. Retrospective
analyses, and the intention of the Code, the adjudicating authority would be faced with the conundrum of
examining,
1. whether the change brought vide the Notification is by necessary implication, retrospective;
2. whether the date of 'default', date of demand notice, date of filing of the insolvency petition, date of
adjudication or time of vesting of right in the creditor (viz. the right to apply and / or right to admission)
would be the relevant date for application of the Notification;
3. its power, at the time of passing of the adjudication order, to go beyond the letter of the Notification,
and refraining itself from applying the Notification to matters for 'admission' to cases where the amount
of default is less than Rs. 1,00,00,000.
Recently, Kolkata Bench of the NCLT, observed that “It is a well settled law that a statute is presumed to
be prospective unless it is held to be retrospective, either expressly or by necessary implication. When
the amendment to Section 4 of the Code was, inserted a proviso enhancing the pecuniary jurisdiction
for filing applications as against small and medium scale industries, nowhere in the notification
mentioned that its application will be retrospective. Therefore, it appears to me that the amendment
shall be considered as prospective and not retrospective.” However, various aspects may not have been
considered in arriving at this observation, and a simplistic solution to a complicated question has been
provided.
1. The law on the instant aspect is, clearly, not yet settled, and in the absence of a clarification from the
Government, the Supreme Court of India would, perhaps, eventually, lay down the parameters for
application of the Notification. Whilst, no straight jacket formula is possible, and each case would be
required to be examined independently, the following thoughts may merit consideration:
2. The right to file a petition against a CD is different from right to admission of the CD into CIRP. In a
given situation where an insolvency petition has been filed but has not been adjudicated, the right to file
the petition as per the erstwhile threshold limit was vested in the petitioner, however, the right to
admission did not vest or even accrue.
Therefore, even applying the analogy prevalent in relation to other statutes, asprior to its amendment,
which can be applied only to rights which have vested and not future rights, the right to admission,
being a future right ought to attract and satisfy the Notification.
3. As the petitioning creditor becomes entitled to file an insolvency petition against a CD upon occurrence
of a default, within the limitation period, and if the Notification is applied prospectively, on the basis of
the analogy prevalent in the cases of other laws (as has been done in Om Boseco, supra), the
Notification would apply only to insolvency petitions, where the date of default is post date of the
Notification. This would, perhaps, lead to a preposterous situation, where the adjudicating authority
would apply old provisions of the Code to all cases pending for admission and also cases which are yet
to be filed, albeit, default has occurred prior to the date of the Notification.
The mechanism under the Code, distinctly provides for two independent yet related steps. First being, if
the CD 'defaults' in the payment of a financial debt, entitling the financial creditor to approach the
adjudicating authority under the Code. The other being, adjudication by the adjudicating authority if a
'default' has occurred. This being said, prior to the Notification, an
application for a default above Rs.1,00,000 but below Rs. 1,00,00,000 may have been appropriately

4. filed. However, with the said Notification coming into effect, it can be argued that the adjudicating
authority would not have the powers under the Code to admit a CD into CIRP where the amount of
default is less than Rs. 1,00,00,000.
As the arrangement under sections 8, 9 and 10 of the Code stands in contrast to section 7 of the Code,
the above argument would apply differently in case of financial debt and operational debt.
4. Further, it can also be argued that, the differential treatment between a petitioning creditor who has filed
an insolvency petition, and the one who has not, prior to the Notification, although the date of default in
both cases is prior to the date of the Notification and the amounts of default are similar, are violative of
the principles of equality enshrined in the Constitution
Vipul Ganda is an advocate practising in courts at Delhi. He was assisted by his chamber colleagues,
Advocates Shreya Jain and Alexandra Celestine in writing this article.
This article was published by the Bar & Bench on their website on May 31, 2020
(https://www.barandbench.com/columns/ibc-the-revised-threshold-pickle).