Suspension of Section 7, 9 and 10 of Insolvency Bankruptcy Code: The IBC (Amendment) Ordinance, 2020
Lately, on third day of June, 2020 Union Cabinet cleared the proposal for suspension of Section 7, 9 and 10 of Insolvency Bankruptcy Code, 2016 (Code) for the period of six months starting from 25th of March, 2020.
Thus, on fifth day of June, 2020 Government of India through the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 (“Ordinance”) and in pursuant to the power conferred under Section 123 of the Constitution, promulgates the following ordinance;
“Section 10 A, Notwithstanding anything contained in Section 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.”
General Interpretation: Any default arising before 25th March, 2020 shall not fall within the purview of Section 10 A and hence an application by the financial creditor, operation creditor or corporate debtor shall continue to be entertained with the recent prescribed threshold limit of default i.e. INR 1 Crore. Further any default during six months or such period as may be extended by notification after 25th March, 2020 will not trigger Section 7, 9 and 10 of IBC.
In simplified terms, the government has introduced the ordinance to be read with the notification if any.
Implication of present amendment shall be as follows;
1. No Application can ever be filed under Section 7, 9 or 10 of the Code for the default arising on or after 25th of March, 2020 for a period of six months or extended period not beyond 1 year;
2. Application will be entertained before the Adjudicating Authority for the default arose before 25th of March, 2020; and
3. For all the pending application, it is apprehended that proceeding shall continue as it is irrespective of default amount as the March notification does not prescribes for its retrospective implication.
Disclaimer: The information shared in this article is from general awareness prospective. Nothing contained herein is, inducive or misleading.
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