No IBC proceedings for three more months

In an attempt to give more relief to stressed corporates due to Covid19 pandemic, the government on Thursday restrained insolvency proceedings against defaulting borrowers for three more months.

The relief would be available only those borrowers who have defaulted on their loan repayments on or after March 25, 2020.

In order to protect the companies who have been experiencing financial distress on account of the pandemic, the government had earlier suspended invocation of the Insolvency & Bankruptcy Code ( IBC) for a period of six months with effect from March 25, 2020.

Now the Narendra Modi government has 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 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,” the government notification said.

On September 19 the Rajya Sabha passed the Insolvency and Bankruptcy Code ( Second Amendment) Bill, 2020, which ensures that fresh insolvency proceedings will not be initiated against a company starting March 25. Earlier the period was for six months and now the amendment allows the government to extend this suspension for a maximum period of one year.

Any defaults, occurring on or after March 25, 2020, until the suspension remains in force, have been permanently excluded for the purpose of initiating insolvency proceedings.

THE CENTRE has decided to extend the suspension for another three months until the last week of December under the newly inserted Section 10A of the IBC.