The Government has issued a fresh Notification No. S.O. 3265(E) dated 24th September, 2020 extending the suspension of Sections 7, 9 and 10 [meant no fresh insolvency filings could be made by financial creditors, operational creditors, and the corporate debtor itself] of the Insolvency and Bankruptcy Code by another three months. The suspension was due to expire on September 25, 2020.
It is to be noted that the Government, through an ordinance, had suspended initiation of fresh insolvency proceedings for defaults arising on or after March 25, 2020, for a period of six months. This effectively shut down all insolvency filings against any company that defaults on a debt or payment post March 25, 2020.
The ordinance also gave the Government power to extend the IBC suspension up to one year. It is to be noted that the parliament approved the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 that replaced this ordinance. The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 was introduced in Rajya Sabha on September 15, 2020. The Rajya Sabha had passed the bill earlier on September 19, 2020. The Parliament on September 21, 2020 passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 with the Lok Sabha passing the bill through a voice vote.
It amends the Insolvency and Bankruptcy Code, 2016. The Code provides a time-bound process for resolving insolvency in companies and among individuals. Insolvency is a situation where individuals or companies are unable to repay their outstanding debt. The Bill seeks to temporarily suspend initiation of the corporate insolvency resolution process (CIRP) under the Code. It replaces the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 promulgated on June 5, 2020.
The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 which seeks to replace aforesaid Ordinance, inter alia, provide for the following, namely:—
a) to insert a new section 10A in the Code to provide for temporary suspension of sections 7, 9 and 10 in respect of 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; and
b) to insert a new sub-section (3), in section 66 of the Code to provide that 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.
The Government has now decided to further extend the suspension for another three months until the last week of December under the newly inserted Section 10A of the IBC. In this regard, a Notification No. S.O. 3265(E) dated 24th September, 2020 has been issued as under-
“In exercise of the powers conferred by section 10A of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) [as inserted by section 2 of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2020 (17 of 2020)], the Central Government hereby notifies further period of three months from the 25th September 2020 for the purposes of the said section,”
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