The Insolvency and Bankruptcy Code (Amendment) Ordinance (IBC) could prove to be a game-changer and be essential for the very survival of numerous corporate debtors across the country.
Article 123 of the Constitution of India grants the President of India certain law-making powers to promulgate ordinances when either of the two Houses of Parliament is not in session. The fundamental reason for bestowing the executive with the power to issue ordinances is to deal with situations where an emergency in the country necessitates urgent action, such as the unprecedented economic and health crisis faced by the nation in the wake of the pandemic COVID-19.
Section 10A and sub-section (3) to section 66 have been inserted by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 dated 05.06.2020
Notwithstanding anything contained in Sections 7, 9 and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor 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: Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period. Explanation.- For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020.
Section 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 allow for insolvency filings by financial creditors, operational creditors and the corporate debtor itself. This effectively shuts down all insolvency filings against any company that defaults on a debt or payment.
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.