On 5 June 2020, the President of India issued the Insolvency and Bankruptcy Code (‘Code’) (Amendment) Ordinance, 2020 (‘Ordinance’) due to the uncertainty caused by the Covid-19 pandemic and the related economic fallout.
The Ordinance puts a permanent bar on the initiation of corporate insolvency resolution proceedings for any defaults arising on or after the commencement of the nationwide lockdown i.e. from 25 March 2020, for a period of six months (which may extend to one year, as may be notified) from such date.
In effect, no insolvency resolution can be initiated under Sections 7, 9, and 10 of the Code by or against a corporate debtor for defaults arising within this period.
The Ordinance suspends these sections on grounds that the pandemic has created uncertainty and stress for business for reasons beyond their control; the nationwide lockdown has added to disruption of normal business operations; and in such circumstances it would be difficult to find adequate number of resolution applicants for distressed/defaulting businesses.
The Ordinance can be accessed through the following link: