The government has suspended the provisions of the Insolvency And Bankruptcy Code (IBC) giving a huge relief to the corporate world. The actions under this law will not be counting the days of lockdown. The government has issued two notifications in this regard on Friday. However, the lockdown date is not mentioned in the notification.
According to the information, the first notification states that during the period of lockdown implemented by the Central Government, any activity under the Corporate Insolvency Resolution Procedure cannot be undertaken during the lockdown period. It states that activity under the liquidation process that cannot be completed during lockdown is excluded from calculation in the time-line of this process.
The government had suspended the provisions of the Insolvency and Bankruptcy Code (IBC) for six months on Wednesday, giving a big relief to the corporate world two days ago. It also said that this suspension can be extended for one year, given the present financial situation due to coronavirus.
Sources said that in the cabinet meeting it was decided to impose a six-month moratorium on the implementation of sections 7, 9 and 10 of the Insolvency and Bankruptcy Code (IBC). The move has been taken to provide relief to the corporate world amid the corona epidemic, where defaulters will now be exempted from insolvency law for a minimum of six months. With this step, banks will also have to restructure their debt. The new rule will come into force as the ordinance is issued. At present, the insolvency process can be initiated against the defaulters if they do not repay the loan for 90 days. Finance Minister, Nirmala Sitharaman had already indicated the change in rules.
Current provisions of sections 7, 9, 10
Section 7: It empowers financial lenders to initiate insolvency provisions against defaulters.
Section 9: This operation gives creditors the right to apply to initiate insolvency proceedings against defaulters.
Section 10: This gives the defaulting company the right to apply to go into the corporate insolvency process.