Amid the lockdown, the President of India, Mr. Ram Nath Kovind passed the much- awaited amendment ordinance to suspend and implement certain provisions for the time being due to the COVID-19 disruption which stopped the functioning of many markets and has made companies insolvent therefore the current amendments came into force to save these companies and help them to revive.
The Ordinance has been passed to suspend Section 7, 9 and 10 of the IBC. No one can file an application for initiation of insolvency proceedings against the companies during this time.
SECTION 7 of the IBC pertains to the initiation of the insolvency process by a financial creditor – The financial creditors along with other creditors jointly or by themselves can file an application against the corporate debtor when a default has taken place for initiation of the insolvency proceeding in front of the adjudicating authority.
SECTION 9 covers insolvency plea by an operational creditor – supplier, employee and workman- under section 8 of the Act, you are required to give notice to the debtor demanding the due payment before filling application for insolvency in the court. The operational creditor is free to file a case before the adjudicating authority after the expiry of the 10 days of the delivery of the notice and if he has not recovered his due amount from the debtor.
SECTION 10 States that, when a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority and within 14 days the authority shall decide as to whether accept or reject the application based on its completion.
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Impact of suspension of CIRP: pandemic has had an adverse impact on every sector of the World. The ordinance aims to lessen the burden of the companies and simultaneously work for its revival. The ordinance was also passed with an aim of relaxing the overburdened insolvency tribunals and providing some time to restructure and revamp the regulations and
provisions. Section 10 A has been inserted:
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, as may be notified in this behalf
