In the wake of Pandemic across the globe, it seemingly has pushed the running machinery of our country as well in the backfoot. In the backdrop of early lockdown and forced vacation, the economic wheel of our country which are financial institutions and corporate bodies fret and sensed insolvency which could have led to bankruptcy proceedings. We saw the breakout which centuries would never have witnessed certainly. Before we understand the dynamism aftermath COVID’ 19, the readers must know what is IBC?
Insolvency and Bankruptcy Code
Insolvency and bankruptcy code got final clearance in the year 2016; newly implemented law was proposed to mitigate the burdens and long process awaited before NCLT / NCLAT (Tribunals) by way of substituting the faster redressal mechanism. Any Corporate body, companies, partnership firm, etc, can now within the time span given in the code for disposal of proceedings can get relief on the matter related to repayment of loan and debts; a creditor can initiate the proceedings for deferring payment or if money is due. The term ‘insolvency’ is a situation where an individual entity or bodies cannot meet the obligation of their liabilities and bankruptcy is a legal proceeding, where court orders to declare such party to be insolvent and consequently proceed with the resolution for insolvency.
The pandemic triggered in the operational shutdown of MSMES’s and other commercial sectors. Centre with a view to curtail the effect of inevitable closure and to extend relief to these commercial units, exercised its powers under section 4 IBC, increased the upper limit to Rs 1 crore which were earlier Rs 1 lakh for invoking insolvency proceedings and to exclude the Small and micro-units from the purview of liquidation. In an attempt to minimise hardships which could be inflicted by potential creditors, the central government has also suspended sections 7, 9 and 10 of IBC for the period of 6 months, refraining functional creditors, operational creditors and corporate applicant to invoke the threshold when time-barred.
Furthermore, NCLAT taking Suo moto cognizance and given a directive in reference to the “Quinn Logistics India Pvt. Ltd. vs. Mack Soft-Tech Pvt. Ltd” held that the period of lockdown shall be excluded for the purposes of CIRP and has ordered the continuance of the interim/stay order in any appeal under Companies Act, 2013 or Competition Act, 2002 passed by the Tribunal until the next hearing. For computation of activities and proceedings for Corporate Insolvency Resolution process the time period of lockdown has been excluded by amending and inserting 40 ‘C’ to CIRP to Regulations, 2016 and Regulation “47A” to the liquidation Regulations.
However, the said amendments will not attract the pending suits before the announcement of the lockdown made and therefore will not have any retrospective effect but prospective one. This will allow ‘resolution professionals’ to expeditiously dispose of the pending matters before tribunals.
Attempt to provide financial stability and control the tide owing to the pandemic, the government has made innumerable attempts and put efforts to keep the MSME’s alive. Keeping in view all factors into consideration it was perhaps the need of the hour and proving out be the righteous approach. However, the migrant’s population is yet to the “see the light of a day.”
By – Anuj Gupta
EDUCATION- B.A. LL.B (Hons), Final Year