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Rajya Sabha passes the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 - (19 Sep 2020)

Insolvency

Rajya Sabha amends IBC by temporarily suspending initiation of Corporate Insolvency Resolution Process. The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 was introduced in Rajya Sabha on September 15, 2020. The Second Amendment seeks to replace the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 issued in June. In the light of the extraordinary economic situation caused by COVID-19 pandemic, a need was felt to temporarily suspend initiation of corporate insolvency resolution process under the Code, initially for a period of six months or such further period, not exceeding one year from 25th March, 2020, to provide relief to Companies affected by COVID-19 to recover from the financial stress without facing immediate threat of being pushed to insolvency proceedings.

The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 which seeks to replace the Ordinance, provides for insertion of a new section 10A in the Code through which Sections 7, 9 and 10 are temporarily suspended in respect of any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year. Further, inserts a new sub-section (3), in section 66 of the Code to provide that 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.

The Insolvency and Bankruptcy Code, 2016 was enacted to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons. Further, it aims to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India.

Tags : CIRP   INITIATION   SUSPENSION  

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