The Hon’ble President of India, on 5th June 2020, promulgated the Insolvency & Bankruptcy Code (Amendment) Ordinance, 2020 vide notification no. CG-DL-E-05062020-219746.
As per the ordinance, since the COVID-19 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 and since there was a nationwide lockdown in force since 25th March 2020 which added to the disruption of normal business operations, it is difficult to find the adequate number of resolution applicants to rescue the corporate person who may default in discharge of their debt obligation. Therefore in view of the above, it was considered expedient to suspend the Sections 7, 9 and 10 of the IBC, 2016 to prevent corporate persons which are experiencing distress on account of unprecedented situation, being pushed into insolvency proceedings for some time.
Furthermore, it was considered expedient to exclude the defaults arising on account of unprecedented situation for the purposes of insolvency proceeding under the IBC.
Insertion of Section 10-A
Notwithstanding Sections 7, 9 & 10 of the IBC, 2016, 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.
NO APPLICATION SHALL EVER BE FILED FOR INITIATION OF CORPORATE INSOLVENCY RESOLUTION PROCESS OF A CORPORATE DEBTOR FOR THE SAID DEFAULT OCCURRING DURING THE SAID PERIOD.
Insertion of new sub-section i.e. sub-section 3 to Section 66
As per Section 66(3), it has been provided that notwithstanding anything contained in Section 66, no application shall be filed by a RP (Resolution Professional) under Section 66(2) with respect to such default against which initiation of CIRP is suspended under Section 10-A.
However, if the default had occurred prior to 25th March 2020, then, initiation of the insolvency proceedings shall not be barred.
Copy of notification: CG-DL-E-05062020-219746
-Adv. Tushar Kaushik