Loan moratorium base- what transpired between the Reserve Bank and The IBC laws
Reserve Bank of India has informed the Top Court that borrowers opting for resolution of COVID-related stressed loans shall not be required to submit any specific plans.
The Resolution Framework does not require any resolution plan in any form to be submitted to the lending institutions at the time of request for invocation Rather, for invocation, the borrowers are required to merely submit a request to the lending institutions for being considered under the Resolution Framework.
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Earlier, India’s central bank earlier announced a resolution framework to mitigate the financial stresses faced by entities due to disruption in business activity, on account of the Coronavirus pandemic. In this background, RBI has told top court that the specific contours of resolution plan to be implemented may be decided by the lending institutions, in consultation with the borrower. On December 8, the Centre told Supreme Court that to roll out interest waivers would mean that a huge waiver will be attracted which in turn would affect the economy. “If the banks were to bear this burden, it would necessarily wipe out a substantial and a major part of their net worth, rendering most of the banks unviable and raising a very serious question mark over their very survival. Justice Bhushan told him at this juncture that be courts were conscious of this and that it would not pass any orders which would shake the economy.
KERALA HC stays NCLT order- notification raising IBC threshold as Rs one Cr will apply only prospectively
The Kerala High Court on Friday stayed the order of the National Company Law Tribunal (NCLT) Kochi bench which held that the March 24 notification raising the threshold limit for insolvency proceedings as Rupees One Crore will apply only prospectively. In the case M/s Tharakan Web Innovations Pvt Ltd vs Cyriac Njavally, the NCLT held that the March 24 Notification which enhanced the minimum threshold for insolvency proceedings in the wake of COVID-19 pandemic does not save a corporate debtor when the default has taken before the pandemic. After hearing the submissions of Senior Advocate Joseph Kodianthara, a single bench of Justice PV Asha issued notice on the petition and stayed the insolvency proceedings against the petitioner in the NCLT. The insolvency proceedings were initiated by Cyriac Njavally with respect to an alleged default of Rs 31 lakhs. The corporate debtor filed an application before the NCLT objecting to the maintainability of the proceedings in view of the March 24 notification. It was contended that the application stated to have been filed on March 7 was incomplete and that it was actually filed only on September 25. The date of proper filing should be regarded as the ‘initiation date’ for the insolvency proceedings. In the instant application filed under Section 9 of IBC, the debt has become due on 06.07.2019. That on 25.02.2020, the Demand Notice in Form 3 under Rule 5 of the IBC, 2016 was sent to the Corporate Debtor at its Registered Office through speed post. However, no reply raising any dispute has been received by the Respondent/operational creditor within the stipulated period.
