Indian Insolvency Law responds to the COVID-19 Pandemic

With more than three lakh confirmed cases and 14 thousand deaths across 190 countries, the Coronavirus disease (COVID-19) pandemic has caused (and continues to cause) unprecedented disruptions in the global political, social and economic environment. India has not remained untouched from this. With almost 500 confirmed cases and the country in lock-down mode to prevent further outbreak, social and economic activities have come to a grinding halt.

The pandemic has forced governments across the world to impose restrictions on working and travel conditions as well as human movement. The severity of the situation requires quick and decisive action from the Government and all sections of the economy to prevent ‘deepening’ of the crisis.
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On December 7, 2016, the Ministry of Corporate Affairs (MCA) notified and brought into operation a significant chunk of sections under the Companies Act, 2013, including provisions relating to compromises, arrangements, reconstructions, mergers and amalgamations, with effect from December 15, 2016 (the Notification). This marks a paradigm shift in the corporate restructuring process, which is all set to undergo a transition from the earlier restructuring processes under the aegis of the High Courts, to National Company Law Tribunals (NCLTs), constituted with effect from June 1, 2016.

The MCA notified the Companies (Removal of Difficulties) Fourth Order, 2016, and the Companies (Transfer of Proceedings), Rules, 2016, on the same date as the Notification, clarifying that proceedings relating to schemes will stand transferred, forthwith, except where orders have been reserved. While applicants with final hearings on or before December 14, 2016, who were expecting orders to be reserved, heaved a sigh of relief, other applicants were caught in a limbo, while prospective applicants were left to surmise, and gear up for implementation of the new provisions, yet to be tested by NCLTs. The Notification was soon followed, on December 14, 2016, by the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, on sanction of schemes by NCLTs.
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