On June 5, 2020, the President of India promulgated the Insolvency and Bankruptcy (Amendment) Ordinance, 2020 (“Ordinance”), in furtherance to the economic measures announced by the Ministry of Finance to support Indian businesses impacted by the outbreak of the Covid-19 pandemic. The Ordinance has introduced the following amendments to the Insolvency and Bankruptcy Code, 2016 (“IBC”) (effective immediately):
- Section 10A has been inserted in the IBC, restricting filing of any application for initiation of the corporate insolvency resolution process (“CIRP”) of a corporate debtor (being a company or a limited liability partnership) for any default arising after March 25, 2020, for a period of six months or such further period, not exceeding one year from March 25, 2020, as may be notified in this behalf (such period being “Specified Period”).
Further, a proviso has been inserted in section 10A to specify that no application shall ever be filed for initiation of CIRP of a corporate debtor for the said default occurring during the Specified Period i.e. CIRP can never be initiated on the basis of a default during the Specified Period, even if the default is continuing after having occurred during the Specified Period.
- A non-obstante clause has been inserted in to section 66 (Fraudulent trading or wrongful trading) of the IBC to give protection to the directors of a corporate debtor. Accordingly, no application can be filed by a resolution professional under sub-section 66(2), in respect of such defaults against which initiation of CIRP is suspended under Section 10A of the IBC.
Continue Reading Indian Insolvency Law responds to the COVID-19 Pandemic- Part-II