Covid -19 widespread has created havoc and chaos all around the globe. The increase in number of cases of Pandemic has compelled countries all over the world to bring different types of reforms towards their health, financial and legal sector. Due to Pandemic Covid-19, Indian economy is also suffering and which led the government to propose various reforms and implications to manage the Indian economy and businesses. One of the major reforms was change in law related to Insolvency and Bankruptcy Code.
The Insolvency and Bankruptcy Code, 2016 (IBC) re-envision the structure for insolvency and bankruptcy law in India. It gives instrument for the insolvency and bankruptcy resolution of debtors within specified time frame to permit expansion of the worth of their estates and capitals, it promotes businessman and entrepreneurs.
Section 4 of Insolvency and Bankruptcy Code, 2016 states regarding the application for initiation of corporate insolvency resolution process. Section 4 of Insolvency and Bankruptcy Code, 2016 interprets :
“This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees: Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees.”
On March 24, 2020, India’s finance minister, Nirmala Sitharaman announced that threshold limit for filing an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code shall be increased to Rs.1,00,00,000 (Rupees One Crore) from the threshold limit that was Rs.1,00,000 (Rupees One Lakh). The central government on March 24, 2020 through gazette notification stated “In exercise of the powers conferred by the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby specifies one crore rupees as the minimum amount of default for the purposes of the said section.” Therefore, pecuniary jurisdiction increased to Rs.1,00,00,000 (Rupees One Crore).
On June 5, 2020, as per the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020, the Section 10A was inserted stating that the provisions of Section 7, 9 and 10 of the Code will be suspended from March 25, 2020 when national wide lockdown was declared for period of six months or more, not exceeding one year. The Ordinance stated that due to Pandemic Covid-19 the businesses, financial markets and economy all over the world including India was severally impacted which also generated distress and unreliability for businesses and entrepreneurs. The main purpose of this Ordinance is to safeguard the interest of borrowers which has been resulted in economic catastrophe due to Pandemic Covid-19 from being forced into insolvency and bankruptcy. The creditor will not be having any power to file an application under the Code for defaults which arised during Pandemic time.