IBC Ordinance to Stop Insolvency Proceedings for Post March 25 Defaults
Promulgated
The President Ram Nath Kovind on Friday, 5 June 2020 promulgated an ordinance to amend
the Insolvency and Bankruptcy Code (IBC) to stop fresh insolvency proceedings due
to defaults because of the COVID19.
There will not be initiation of corporate insolvency resolution
process of a corporate debtor filed for any default arising on or after 25th March,
2020 for a period of six months, not exceeding one year from such date, according
to the ordinance.
The Amendment has added Section 10 A. which states, Notwithstanding
anything contained in Section 7, 9, and 10, no application for initiation of corporate
insolvency resolution process of a corporate debtor shall be filed, for any default
arising on or after 25th March, 2020 for a period of Six months or such further
period, not exceeding one year from such date, as may be notified in this behalf:
Provided that no application shall ever be filed for initiation
of corporate insolvency resolution process of corporate debtor for the said default
occurring during the said period.
The Amendment of Section 66 was also made according to which
after sub section (2), the following sub-section will be inserted, namely; –
(3) Notwithstanding anything contained in this section, no
application shall be filed by a resolution professional under sub-section (2), in
respect of such default against which initiation of corporate insolvency resolution
process is suspended as per section 10A”.
It was said that the entire ecosystem for implementation of
the Insolvency and Bankruptcy Code, 2016 is in place and provisions relating to
corporate insolvency resolution process and liquidation process for corporate persons
under the Code are in operation, whereas COVID-19 pandemic has impacted business,
financial markets and economy all over the world, including India and created uncertainty
and stress for business for reasons beyond their control, whereas a nationwide lockdown
is in force since 25th March, 2020 to combat the spread of COVID-19 which has added
to disruption of normal business operations.
“Whereas, it is difficult to find adequate number of resolution
applicants to rescue the corporate person who may default in discharge of their
debt obligation, and whereas it is considered expedient to suspend under section
7,9 and 10 of the Insolvency and Bankruptcy Code, 2016
to prevent corporate persons which are experiencing distress on account of unprecedented
situation, being pushed into insolvency proceedings under the said Code for some
time.
Whereas, it is considered expedient to exclude the defaults
arising on account of unprecedented situation for the purposes of Insolvency proceedings
under this Code, whereas the parliament is not in session and the President is satisfied
that circumstances exist which render it necessary for him to take immediate action”,
said in the notification.
[Source: IndiaLegal]