New Delhi | Jagran Busines Desk: The Lok Sabha passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 on Monday through a voice vote. Responding to the queries raised during the debate on the insolvency code, Finance Minister Nirmala Sitharaman said the bill is aimed at bringing immediate relief to the companies affected by the COVID outbreak. The bill seeks to replace an ordinance promulgated in this regard in June. "We had to prevent any company, stressed because of COVID, from being pushed into insolvency", the Finance Minister said. Listed below are the key features of the proposed bill.
The Bill mandates that a default on repayments from March 25, the day when a nationwide lockdown began to curb the spread of coronavirus, would not be considered for initiating insolvency proceedings for at least six months.
The Bill, already in force as an Ordinance, seeks to amend the IBC Code 2016 and temporarily suspend initiation of the Corporate Insolvency Resolution for a period not longer than one year.
The Insolvency and Bankruptcy Code allows a corporate debtor as well as its creditors to initiate an insolvency resolution process.
The Ordinance prohibits the initiation of insolvency proceedings for defaults arising during the six months from March 25, 2020.
Notably, there is no reprieve for the businesses that had failed to repay their debt before the beginning of the lockdown forced due to COVID. "We did not want to hurt any other proceedings initiated before March 25 due to the reasons apart from those associated with the COVID-19 fallout."
The IBC code pertains to timely resolution of cases pertaining to insolvent companies and individuals. Insolvency means when a company, entity or an individual is no longer able to repay their outstanding debt. The Bill was cleared by the Upper House of the Parliament on Saturday.