The Central Government on Friday promulgated Insolvency and Bankruptcy (Amendment) Ordinance 2020 to effectively suspend the operation of Sections 7, 9 & 10 of IBC with respect to default arising on or after March 25 for a period of 6 months, extendable up to maximum of one year from such date as may be notified.
Also, no application for insolvency can ever be filed for the default occurring in this period. The exemption is not applicable to defaults occurring prior to March 25.
This has been done by inserting Section 10A in the principal Act, stating :
"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 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".
Also, sub-section (3) has been added to Section 66 to state that no resolution professional should file any application with respect to such default against which CIRP has been suspended as stated in Section 10A.
The Centre said that it was considered expedient to suspend Sections 7, 9 and 10 of IBC to prevent corporate persons experiencing distress on account on unprecedented situation being pushed into insolvency for some time.
On May 17, Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, had announced the decision of the government to suspend IBC for defaults which occurred due to lockdown.
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