FM proposes amendments to insolvency bill
Finance minister Nirmala Sitharaman on Tuesday introduced in the Rajya Sabha a Bill to suspend insolvency proceedings for up to one year against fresh Covid-related default. The bill will replace an ordinance aimed at providing breather to thousands of firms battered by the pandemic.
Under the ordinance, the government had sought to suspend invocation of three sections – 7, 8 and 10 — of the IBC for fresh default from March 25. These sections pertain to with the initiation of the insolvency proceedings by financial and operational creditors and corporate debtors. However, insolvency applications filed for default before March 25 are being entertained.
The March 25 date (for filing insolvency application) also came as a huge relief for the lenders who had filed applications or intended to do so against stressed firms that had defaulted before the pandemic started to spread, in accordance with RBI’s June 7, 2019, circular. This circular stated that a default case will have to be referred to the NCLT under the IBC if no other resolution plan is firmed up within six months.