THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ORDINANCE, 2020
Due to the over 60-day lockdown demanded by the Covid-19 pandemic, several businesses, especially the MSMEs, have suffered humongous monetary loss. In a developing country like ours, a res integra situation of the like, will only hamper and dampen the growing economy, leading to various disturbances amongst the people. Therefore, with a view to revive and strengthen the MSMEs, which are often regarded as huge contributors to the Indian economy, the President of India, promulgated The Insolvency And Bankruptcy Code (Amendment) Ordinance, 2020, on the 5th day of June, 2020. Prior to the instant Ordinance, the Union Finance Minister, Ms. Nirmala Sitharaman, announced an economic package of 20,000 crores for the MSMEs and also a breather by the way of suspending Sections 7, 9 and 10 of The Insolvency and Bankruptcy Code, 2016. In furtherance of the same, the instant ordinance was promulgated by the President of India.
The instant Ordinance adds to The Insolvency and Bankruptcy Code, 2016, a new section, viz. Section 10A. This section states that no application can be made or preferred to initiate corporate insolvency resolution process against a corporate debtor, for a default which arises on or post the 25th day of March, 2020, for a term of six months or more, but not exceeding one year. It also states that corporate insolvency resolution process can never be initiated against a corporate debtor for his default which occurred during the said period. It insulates the corporate debtors, completely. This Ordinance does not apply to defaults or corporate debtors which arose prior to the 25th day of March, 2020. Therefore, financial and operational creditors can file applications thereby initiating corporate insolvency resolution process against the corporate debtor, only if the default arose before the said date.
Also, vide the instant Ordinance, a sub-section has been added, viz sub-section (3) of Section 66 of The Insolvency and Bankruptcy Code, 2016. This provision states that a resolution professional cannot file an application with respect to the default that arose after the 25th day of March, 2020.
Authored by:
Vishnu P.V
Advocate