The Ministry of Corporate Affairs by a notification dated September 24,2020 has extended the suspension for Insolvency proceedings having default and to protect those experiencing financial distress on account of the pandemic by a period of three months, effective from September 25, 2020.
Earlier, The President has notified by an Ordinance dated 5 June on the Suspension of Sections 7, 9, and 10 of the Insolvency and Bankruptcy Code, 2016. As per this ordinance, no insolvency proceedings can be initiated against any borrower for defaults arising on or after March 25, 2020, until September 25, 2020.
On 23 September, 2020 the Insolvency & Bankruptcy Code (Second Amendment) Act, 2020 inserted a new section namely:
“10A. 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.”
Because of the new Section 10A of the Insolvency & Bankruptcy Code (Second Amendment) Act, 2020, the initiation of the Corporate Insolvency Resolution Process is suspended, and no new insolvency proceedings could be initiated for defaults arising on or after March 25, 2020.
The changes to the Insolvency and Bankruptcy Act,2016 was first announced by Finance Minister of India Smt. Nirmala Sitharaman as part of the Atma Nirbhar Bharat Abhiyan reforms Stating as “Priority is to keep the company to be in a going concern rather than to liquidate them at the earliest,”