IBBI Chairperson says Restoration of Normalcy for Resolution of Stress under Insolvency & Bankruptcy Cases
The Insolvency and Bankruptcy Board of India (IBBI) Chairperson, MS Sahoo, stated that normalcy has been restored regarding the resolution of stress under the insolvency law, with the expiry of suspension of fresh proceedings.
It is been a year that relevant provisions were suspended due to the pandemic COVID-19. The Chairman stated that fresh proceedings under the Insolvency and Bankruptcy Code (IBC) can now be initiated.
On 25 March 2020 some of the provisions under the IBC regarding time-bound and market-linked resolution of stressed assets were suspended with effect due to the pandemic that has significantly had an impact on the business activities.
The suspension was lifted on 24 March 2021 i.e. after one year. Chairman Sahoo mentioned that the following aspects are clear now-
- The Apex Court cleared the haze around the moratorium on loans;
- The suspension on initiation of corporate insolvency proceedings in respect of Covid-19 defaults expired;
- The Covid-19 has become the 'new normal' for business
IBBI is a key institution that ensures the implementation of the IBC. In June 2020, an ordinance was promulgated to suspend fresh insolvency proceedings and the same came into force retrospectively from 25 March 2020 i.e. the day on which nationwide lockdown was declared to curb the spread of coronavirus infections.
A bill was introduced to replace the ordinance that has amended the IBC that was cleared by Parliament in September 2020. Initially, the suspension of fresh proceedings was for six months starting from 25 March 2020. It was extended twice for three months each firstly till 24 December 2020 and then till 24 March 2021.
Sections 7, 9, and 10 were suspended by the corporate affairs ministry for providing relief for companies hit by the pandemic. These provisions of the IBC deal with the initiation of the corporate insolvency resolution process (CIRP) by a financial creditor, operational creditor, and corporate debtor, respectively.
The amendment had suspended these provisions for a maximum period of one year and accordingly on the expiry of the period of one year these provisions will be active without any further act of the government.