Section 7 allows a financial creditor to file for initiating the corporate insolvency resolution process against a corporate debtor. Suspension of IBC for companies undergoing insolvency: The Ordinance has clarified that the suspension will not apply to any default committed before March 25, 2020, which means that there is no relief for companies already undergoing insolvency. Section 7 [4] and 9 [5] of IBC, talk about the commencement of CIRP by financial and operational creditors and section10 of IBC talks about voluntary commencement of CIRP by the corporate applicant. INTRODUCTION. For Prelims: Overview of the code. Insolvency and Bankruptcy Code. Centre extends suspension of proceedings under IBC by 3 months Earlier in June, the Union Cabinet cleared the proposal to suspend the insolvency proceedings under IBC for six months President Promulgates IBC Amendment Ordinance To Allow Pre-Packaged Insolvency Process For MSMEs . For Mains: Significance and issues associated. However, suspension of the provisions of IBC for such companies may also be necessary. IBC has arguably been … S. 10A inserted. Questions relating to Alternate Remedies available to Creditors The validity of Section 10A of the IBC was challenged before the Delhi High Court, seeking declaration that the suspension of Section 10 of The Insolvency and Bankruptcy Code, (Amendment) Ordinance, 2020 as ultra vires Articles 14 and19(1)(g) of the Constitution of India. to the IBC Ordinance, the same would necessitate a more intricate procedure for the execution of foreign arbitral awards under § 48 and § 49 of the Arbitration Act. Section 7, 8 and 9 of IBC 2016 provides for insolvency filing by financial creditor, operational creditor and cooperate debtor. Defaults prior to 25 March 2020 can be taken before the National Company Law Tribunal (NCLT) under the IBC. IBC. IBC,2016 (Existing) Amendments of Sections/ insertion of new Sections in the Ordinance 1. Later, an ordinance was passed in June 2020. The safe-harbour clause can be extended further upto a year. The Ordinance inserted Section 10A in the IBC which suspended the initiation of corporate insolvency resolution process (CIRP) under Sections 7, 9 and 10. The Author made an attempt to highlight practical difficulties in filing CIRP application by home buyers after this Ordinance. The government has not, however, completely reversed the effects of the IBC. As per the Ordinance, the corporate insolvency resolution process cannot be initiated against a company under the IBC for defaults arising on or after March 25, 2020, for a period of six months Suspended, in case where default has arisen on or after 25.03.2020 for the period of 6 months. By: Jinal Doshi ... 2020, an ordinance (hereinafter referred to as the “Ordinance”) was passed to amend the IBC the statement of objective of which is to safeguard companies from fatality in the midst of a pandemic that continues unabated. Govt brings ordinance for IBC with suspension of fresh proceedings for six months. The suspension of the Insolvency and Bankruptcy Code (IBC) proceedings for a year raises concerns for various stakeholders. But The ordinance titled Insolvency and Bankruptcy Code… Context: The government promulgated an ordinance to amend the Insolvency and Bankruptcy Code (IBC) whereby fresh insolvency proceedings will not be initiated for at least six months starting from March … This suspension, which was extended … In pursuance of the objective of preventing increased number of defaults by various enterprises amidst financial distress faced by the companies due to the Corona pandemic, the Government of India on 22 nd April 2020 proposed to introduce Section 10 A under the Insolvency and Bankruptcy Code, with the objective of suspending Section 7, Section 9 and Section 10 of the Code, … Suspension of Sections 7 , 9 and 10 of the IBC… Section 9. COVID-19 has retarded the momentum of wheels of the Indian economy, the corporates. The ordinance inserting Section 10A in the Insolvency and Bankruptcy Code (IBC), 2016 has opened itself up to a legal challenge. The suspension on filing application is umbrella suspension. Initiation of CIRP by operational creditor The government's ordinance giving a perpetual holiday from the Insolvency and Bankruptcy Code (IBC) for defaults between March and September has left banks and investors in a lurch as it leaves them with only recovery options which have proven to be ineffective. In light of Ordinance, what constitutes an … On June 5 th, 2020, the Ministry of Law and Justice, India notified the ordinance to amend the IBC ("Ordinance"). It was later extended till 25 December 2020. This means that no applications for corporate insolvency resolution process can be initiated by financial creditors, operational creditors and the company itself during the period of applicability of Section 10A starting from 25 March 2020. The Government on Friday notified the ordinance to amend the IBC where fresh cases will not be initiated for defaults on account of the disruption caused due to the coronavirus pandemic. IBC Laws is a complete guide of Indian Insolvency Laws & most updated website to keep you up2date in your Insolvency Profession. It provides for a blanket suspension of the initiation of CIRP for ‘any default arising on or after March 25, 2020 for six months or such further period, not exceeding one year from such date’. Section 7. Section 10A has been inserted into the IBC by the Ordinance. The ordinance will seek to suspend the relevant provisions of IBC Sections 7, 9 and 10, to provide relief to borrowers from being dragged into insolvency. An eclipse with restoration after the suspension period is over .But the Ordinance contemplates perpetual suspension It would have been far simpler to have carved out an exception in the definition of default in Section 3(12) to say that defaults occurring during the period of 6 months starting from 25.03.2020 shall not be considered as default for the purposes of the code. What to study? The Corporate Affairs ministry will issue a special circular to define the time period which will cover "covid related debt" to be exempted from default, the finance minister said To save companies from the insolvency process due to Covid-19, the Centre has proposed an Ordinance suspending Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 (IBC… Ordinance of 20202 ⮚ Inclusion of Section 10A and Section 66(3) The latest Section 10A provides for the complete suspension of initiation of the Corporate Insolvency Resolution Process ("CIRP") under Sections 7, 9, and 10 of IBC for a period of six months, with effect from 25th March 2020. IBC (Amendment) Ordinance, 2020 has been promulgated suspending the provisions of sections 7, 9 & 10 of the Code. The ordinance issued today effective immediately, suspends initiation of any fresh proceedings om insolvency for period of 6months, this ordinance acts as a shield to the companies. By: FE Bureau | ... an Ordinance to amend the IBC to hold off proceedings in the insolvency courts. The second one is consequential to abatement of insolvency filings (see bullet below). The Ordinance covers two major aspects – ‘default’ and ‘wrongful trading’. Suspension will be for six months at least. Initiation of corporate insolvency resolution process (“CIRP”) by financial creditor. The IBC was thus kept in abeyance for a period of six months. Effect of IBC (Amendment) Ordinance, 2020. Read more about IBC suspended for a year, Covid-19 related debt exempted from default on Business Standard. The Insolvency and Bankruptcy (Amendment) Ordinance, 2019, introduced many important amendments and one among them is the threshold requirement for initiation of CIRP by home buyers. Topics Covered: Inclusive growth and issues arising from it. Read more about IBC suspension during Covid-19 will give firms breathing space: Experts on Business Standard. Contact us: M/WA: +91 9577994433 or email: info@ibclaw.in IBC suspension during Covid-19 will give firms breathing space: Experts As per the Ordinance, the corporate insolvency resolution process cannot be initiated against a company under the IBC for defaults arising on or after March 25, 2020, for a period of six months Agencies June 08, 2020 Last Updated at 18:33 IST Illustration: Ajay Mohanty It indefinitely barred the initiation of insolvency proceedings both, voluntarily or by creditors, for defaults arising on or after March 25, 2020. The Insolvency and Bankruptcy Code (Amendment Ordinance), 2020 has come into force and is effective from June 5, 2020. SUSPENSION OF THE IBC, 2016. One of the main objectives behind the amendment of IBC, 2016 is to protect the firms even after defaulting financially and the Ordinance provides them a new life. IBC suspension: Creditors to take a hit, but breather for several firms. Virtual Panel Discussion on 'Suspension of initiation under IBC (Decoding the 2020 Ordinance - Challenges and Way Forward)' Under Sections 7, 9 &10 of the IBC,2016, Creditors of company (financial or Operational) or the company itself may file an application before the National i. In Vitol S.A. v. ETBFSI; Updated: June 09, … Click here to know more on suspension of IBC. As regards default, intention is to exclude default arising out of ‘unprecedented situation’. Lawyers say that a complete suspension of IBC cases for defaults occuring during the six month period is regressive and takes … Section 10A as inserted by the ordinance provides that the IBC suspension is not a blanket one. The IBC Amendment Ordinance 2020 does not protect the personal guarantors to a corporate debtor against which the lenders may choose to take actions under the Code as well as other applicable laws. 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