IBBI Chairperson MS Sahu said that with the expiry of the suspension of the new proceedings, the ‘normalcy’ has been restored in relation to the resolution of tensions under the Insolvency Act.
New proceedings can now be initiated under the Insolvency and Bankruptcy Code (IBC), after a year of related provisions after being suspended in the midst of a coronavirus pandemic
Certain provisions under the Code, which provide for time-bound and market-linked resolution of stressed assets, were suspended from March 25 last year in view of the pandemic affecting business activities. The suspension, which was for one year, expired on 24 March.
Mr. Sahu said that three things are clear now.
“The Supreme Court cleared the haze around the moratorium on loans. Second, the initiation of corporate insolvency proceedings in connection with the COVID-19 lapse ended on Wednesday. Third, COVID-19 has become the new normal for the business. Thus, the normalcy is restored to the resolution of stress under the IBC. “
IBBI is a premier institution to ensure the implementation of the code.
In June 2020, an ordinance was promulgated to suspend fresh insolvency proceedings and the same came into effect retroactively from March 25 – the day a nationwide lockout was put in place to curb the spread of coronovirus.
Later, a bill to change the ordinance that amended the Code was approved by Parliament in September last year.
Initially, there was a suspension of the new proceedings for six months beginning on 25 March. Each was extended twice for three months – until December 24, 2020, and again until March 24, 2021.
Sections 7, 9 and 10 were suspended by the Ministry of Corporate Affairs to provide relief to companies affected by the epidemic.
Sections 7, 9 and 10 deal with the beginning of the corporate insolvency resolution process by a financial creditor, operating creditor and corporate debtor respectively.
On 22 March, the Ministry had told the Lok Sabha that the benefit of suspension applies to all the defaults of the corporate debtor by the end of the period of suspension till 25 March 2020.
“Such omissions arise from March 25, 2020 and will remain the shortest period of time for the purpose of initiating the CIRP under the Code, until the suspension period is completed,” it said in a written reply.
L Vishwanathan, partner at law firm Cyril Amarchand Mangaldas, said the government did not need to take any steps to implement the provisions related to the IBC filing.
“The amendment suspended these provisions for a maximum period of one year and based on the expiry of the period of one year, these provisions would be active without any other act of the government,” he said.
What are the possible immediate implications of the suspension’s cancellation, Viswanathan said, adding that he did not expect significant cases to be filed in the National Company Law Tribunal (NCLT), as creditors were only likely to use the code when a resolution or reorganization. There should be other intervention for. Do not give the required results.
“Creditors are more likely to use the RBI Framework for restructuring on a consented basis before invoking the IBC.
“There may be cases where non-regulated lenders may move to the IBC, where they do not align with the transaction for constitutional reorganization and in other cases you may see settlement or reorganization as a result or in some cases Perhaps a resolution process that can end in a resolution over a period, ”he said.
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