Unilateral Amendment explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 20(2)(b) lets the interim resolution professional "amend or modify" contracts entered into before the CIRP began. Whether that means amend without the other side agreeing is a question the tribunals have answered cautiously, and not finally.
The provision
Under section 20(2)(b) the IRP is granted the authority to "enter into contracts on behalf of the corporate debtor or to amend or modify the contracts or transactions which were entered into before the commencement of corporate insolvency resolution process".
The critical legal question is whether IRPs and resolution professionals can amend existing contracts without the consent of the counterparty.
The argument for unilateral amendment
- The explicit mention of the power in section 20(2)(b) implies that unilateral amendment is permitted.
- If the intent were to require counterparty consent, the provision would have been unnecessary — an agreed variation needs no statutory authority.
- The Code overrides traditional contract law principles in certain circumstances, particularly to preserve the viability of the debtor's business.
The argument against
- Validly executed contracts are legally binding, and allowing unilateral amendment undermines that fundamental principle.
- Section 17(1)(b) already empowers the IRP to exercise the powers of the debtor's board, so the specific powers in sections 20 and 25 are illustrative rather than exhaustive — they do not enlarge what the board itself could do.
- The professional may therefore agree amendments on the debtor's behalf, but has no authority to alter binding agreements without consent.
The counterargument has a structural elegance that repays attention. If section 17(1)(b) transfers the board's powers to the professional, then everything in sections 20 and 25 is a specification of that transfer rather than an addition to it.
And a board cannot unilaterally amend the company's contracts. It can negotiate variations, it can breach and pay damages, but it cannot rewrite an executed agreement by resolution. On that reading, section 20(2)(b) simply confirms that the professional may do what the board could — enter into contracts and agree amendments — and no more.
NCLT Hyderabad — the Trident Hotel case
The Tribunal deliberated on whether IRPs could unilaterally amend contracts during a CIRP, and ruled that a management agreement could not be unilaterally amended by an RP without consent from both parties, reinforcing the binding nature of existing contracts. The findings reflect a cautious approach, balancing creditor and debtor interests while adhering to established contract law.
NCLT Mumbai — Dighi Port Limited
In the insolvency of Dighi Port Limited, the Jawaharlal Nehru Port Trust proposed a resolution plan that included terminating existing sub-lease contracts with Veritas Group, contending they were undervalued and not beneficial for Dighi Port.
The NCLT held that it was already assessing the undervaluation issue in a separate application, and therefore that the resolution plan could not unilaterally terminate legally binding contracts that confer rights to third parties until that examination was complete. Allowing debtors or resolution professionals to disregard binding legal obligations, it observed, could undermine confidence in contractual agreements.
The point is not settled
The Hyderabad ruling is sound in law but the issue seems far from settled. Other benches may take a different view, especially where an existing contract causes prejudice to the debtor, or where the debtor stands to benefit significantly from an amendment.
The example given is instructive: significant funds of the debtor tied up in a security deposit for a leased office space which is underutilised. There, the professional could argue it is in the best interests of the debtor to permit amendment or termination of the lease.
Where the Code does override contracts
| Situation | Position |
|---|---|
| Essential goods | Suppliers cannot terminate supplies during the process |
| Resolution plans | Can be effective without the consent of all parties involved |
| Avoidable transactions | The NCLT has special powers to unwind fraudulent preferences, extortionate and undervalued agreements executed up to 1 to 2 years before the process, restoring benefits to the debtor |
| Insolvency termination clauses | A contract may itself allow termination on insolvency events, but such rights are typically available only to the unaffected party, not the one facing the insolvency |
The pattern is that the Code overrides contracts through defined statutory mechanisms — essential supplies, plan approval, avoidance applications — rather than through a general power in the professional to rewrite terms.
Practical points
- Where an onerous contract is hurting the estate, consider whether the right route is negotiation, an avoidance application, or a term in the resolution plan — not a unilateral amendment.
- Where a plan proposes to terminate contracts conferring third-party rights, expect the Dighi Port objection.
- Check whether the contract has an insolvency termination clause, and who may invoke it.
- Record the commercial rationale for any variation sought; prejudice to the debtor is the fact that may persuade a different bench.
Common mistakes
- Reading section 20(2)(b) as conferring a general power of unilateral amendment.
- Terminating third-party contracts through a resolution plan while an undervaluation application is pending.
- Overlooking that section 17(1)(b) already defines the ceiling of the professional's authority.
- Assuming an insolvency termination clause can be invoked by the insolvent party.