On 19th Septmber, 2020 The Rajya Sabha passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020, whereby fresh insolvency proceedings will not be initiated for at least six months starting from March 25 amid the coronavirus pandemic.
What is Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020
The Code provides a time-bound process for resolving insolvency in companies and among individuals. Insolvency is a situation where individuals or companies are unable to repay their outstanding debt. The Bill seeks to temporarily suspend initiation of the corporate insolvency resolution process (CIRP) under the Code. It replaces the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 promulgated on June 5, 2020.
Replying to a debate on the Bill in the House, finance minister Nirmala Sitharaman said the intention of the IBC is to keep companies a “going concern” and not liquidate them.
The Bill mandates that a default on repayments from March 25, the day when a nationwide lockdown began to curb the spread of coronavirus, would not be considered for initiating insolvency proceedings for at least six months.
The bill seeks to replace an ordinance promulgated in this regard in June.