Govt suspends IBC provisions for up to 1 yr
To offer respite to corporate borrowers, most of whom have been hit hard by the coronavirus pandemic, government is amending the law to suspend up to one year the provisions triggering insolvency proceedings against defaulters. These changes would also pave the way for banks to restructure loans, according to PTI sources. The current norms allow the concerned lender to refer an account for resolution under IBC or any other mechanism permitted by the Reserve Bank of India (RBI) if a payment default exceeds 90 days.
They added that the Union Cabinet on Wednesday decided that an ordinance would be promulgated to suspend three sections of Insolvency and Bankruptcy Code (IBC) – Section 7, 9 and 10 – for up to one year and a decision in this regard. Section 7 and 9 tantamount to initiation of corporate insolvency proceedings by a financial creditor and an operational creditor, respectively; while section 10 encompasses filing an application for insolvency resolution by a corporate.
Last month, Finance Minister Smt. Nirmala Sitharaman had said, “If the current situation continues beyond April 30, 2020, we may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of six months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.”