The Ministry of Law and Justice on Friday notified Insolvency and Bankruptcy Code IBC (Amendment) Ordinance, 2020.
The government of India has effectively suspended fresh bankruptcy proceedings against persons impacted because of COVID-19 for at least six months, up to a maximum of one year. The amendments to IBC were promulgated by President Ramnath Kovind through the Insolvency and Bankruptcy Code Ordinance, 2020. The new rules come into effect immediately, as of June 5.
India rolled out stringent stay-at-home restrictions on 25 March that shut down the economy for two months, pushing many companies toward bankruptcy.
The IBC (Amendment) Ordinance says that no business can be taken to bankruptcy tribunals for defaults during the period of the IBCâs suspension.
The IBC (Amendment) Ordinance inserts new Section 10 A after Section 10. The Section pertains to suspension of initiation of corporate insolvency resolution process which says, âNotwithstanding anything contained in Sections 7, 9 and 10, no application for initiation of corporate insolvency process of a corporate debtor shall be filed, for any default arising on or after 25th March 2020 for a period of 6 months or such further period, not exceeding 1 year from such date, as may be notified in this behalf.
Provided that no application shall ever be filed for initiation for the corporate insolvency resolution process of a corporate debtor for the said default occurring during the period.â
Provisions of this Section shall not apply to any default committed under the said section before 25th March.
Further, the In Section 66, after sub-section (2) subsection âNotwithstanding 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 the corporate insolvency resolution process is suspended for Section 10 Aâ shall be inserted.
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