The Ministry of Law and Justice, on 5th June, 2020 notified the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 as promulgated by the President.
By virtue of the IBC (Amendment) Ordinance, Section 10A has been inserted in the Insolvency and Bankruptcy Code, 2016 with the object to suspend the operation of Section 7, 9 and 10 of the Code so as to prevent corporate persons which are experiencing distress on account of unprecedented situation, being pushed into insolvency proceedings under the said code for some time.
Adv. Puneet Agrawal, Partner, Shuchi Agrawal, Senior Manager, Gaurav Gupta, Associate, ALA Legal, Advocates and Solicitors in an Article published on LawStreetIndia discuss the provision and the implications of the suspension of Corporate Insolvency Resolution Process on IBC Ecosystem.
In the Article, an attempt has been made to do a threadbare analysis using Illustrations. Notably, the Authors also discuss the scenario where a Corporate Debtor has availed the option of 6 month moratorium declared by RBI.
As a result of the newly inserted Section 10A, any application for initiating CIRP can never be filed under Section 7, 9 or 10 of the code for defaults arising on 25th March 2020 upto next 6 months.
Where the due date of any debt falls within 25th March 2020 till next 6 months but the debtor and creditor after discussion has extended the due date to let suppose 25 December 2020 and even on such extended date the debtor fails to pay the debt due then the creditor can file the application for initiation of CIRP if and the bar contain in Section 10A would not apply. (Assuming that the period of 6 months as contained in Section 10A has not been extended, if such period is extended then the situation would be different)
The Creditor will however, have the remedy of taking appropriate action for reliefs provided under the Contract or taking recourse to other laws as may be applicable.
The Article can also be accessed in the following link: http://www.lawstreetindia.com/experts/column?sid=436
Copy of the Article can also be found here:
Puneet is the Managing Editor of the blog, Partner at ALA Legal, Advocates. He has 15+ years of experience in providing tax and legal services. Briefed by various professionals for arguing their matters in the High Court, Puneet is the go to counsel especially for arguing tax and constitutional matters in High Courts of various states across India.
Gaurav is an advocate by profession and has done his B.Com(H) from Hansraj College and LL.B(H) from Faculty of Law, Banaras Hindu University. He has represented clients from Diverse sectors, providing services in Litigation involving Indirect Taxes, IBC, Commercial laws, Direct Taxes, RBI matters. He is active beforewrit Courts, Tribunals and Quasi-Judicial Authorities.
Shuchi is a qualified Chartered Accountant and a law graduate. Shuchi is having more than 6 years of experience in legal and tax advisory services across multiple sectors like real estate, infra, consumer business, etc. Currently, she is working as a Senior Manager in ALA Legal.