Parliament on September 21, 2020, ratified the Insolvency and Bankruptcy Code Second Amendment Bill 2020 which aims to protect companies affected due to the pandemic from fresh insolvency proceeding under the code. The Bill seeks to repeal the ordinance circulated on June 5, 2020 and temporarily suspends the ignition of fresh corporate insolvency resolution process under the Insolvency and Bankruptcy Code.
The Bill vide a newly inserted section namely section 10A, provides immunity to the companies against Corporate Insolvency Resolution Process (CIRP) for any defaults arising during the period of six months starting from March 25, 2020. Section 10A grants permanent protection for defaults arising during the time period of six months, either by the company or its creditors. It states that “no application for initiation of corporate insolvency resolution process of a corporate debt under section 7, 9 and 10 shall be filed, for any default arising on or after 25th march 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf”. The Bill also talks about extension of the time period of six months to one year. However, the same has not been notified by the government yet. The Bill further clarifies that CIRP can be still initiated against any company for any default prior to March 25, 2020.
An amendment has been also made under section 66 of the Code and the following sub section has been inserted as therein –
“(3) Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under sub-section (2), in respect of such default against which initiation of corporate insolvency resolution process is suspended as per section 10A”.
Therefore, the said Amendment is deemed to come into force from June 5, 2020 and protects companies against insolvency proceedings.
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