Suspension of Initiation of Corporate Insolvency Resolution Process During Lockdown
Amendedment: The Insolvency And Bankruptcy Code (Amendment) Ordinance, 2020
Effective from June 05, 2020
Suspension of initiation of corporate insolvency resolution process: The Hon'ble President of India has promulgated the IBC Ordinance, 2020 on June 05, 2020 to suspend the operation of *Sections 7, 9 & 10 of the Insolvency and Bankruptcy Code, 2016 with respect to defaults arising on or after 25.03.2020 for a period of six months, extendable up to a maximum of one year from such date as may be notified. The promulgation of this Ordinance has resulted in the insertion of new clauses, i.e. Section 10A and Section 66 (3) in to the Insolvency and Bankruptcy Code, 2016.
*Section 7: Initiation of corporate insolvency resolution process by financial creditor.
Section 9: Application for initiation of corporate insolvency resolution process by operational creditor.
Section 10: Initiation of corporate insolvency resolution process by corporate applicant.
Section 10A and Section 66 are reproduced herein below:
Section 10A: Notwithstanding anything contained in Sections 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 a corporate debtor for the said default occurring during the said period.
Explanation: It is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020.
Section 66(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.
Amidst the current pandemic COVID-19, this was the most awaited amendment which is very essential for the survival of many corporate debtors across India.