The Finance Minister, Nirmala Sitharaman announced the extension of the suspension of the Insolvency and Bankruptcy Code (IBC) till March 31, 2021.
The government took this step in order to help businesses cope with major stress posed by the COVID-19 pandemic.
The government had suspended fresh proceedings under the IBC for loan defaults on or after March 25 for six months. On March 25, the government imposed a countrywide lockdown, and relief measures including several compliance relaxations and extensions were announced soon after. The suspension was further extended by three months until December 25.
The Finance Minister, Nirmala Sitharaman while addressing the Bangalore Chamber of Industry and Commerce (BCIC) via video conferencing said, “the suspension of the IBC has been postponed even further, from 25th of December to, I think, March 31, 2021.”
“The IBC has been suspended for the entire year, and rightly so, because every industry has gone through stress because of the pandemic and nobody could be drawn towards the insolvency process which may have occurred during the pandemic,” Sitharaman added.
It is noteworthy that the suspension of the IBC is not applicable to any default committed before March 25, 2020. Further, the IBC code empowers the Centre to issue a notification to extend the suspension for a period not exceeding one year.
The finance minister clarified that the Centre has ensured that small and medium (SME) enterprises got the adequate funds to carry on business operations through the emergency credit line guarantee scheme, even as they avoided bankruptcy cases because of the IBC suspension.
