Quick Byte from Charanya Lakshmikumaran, Partner, Lakshmikumaran & Sridharan Attorneys on the Insolvency and bankruptcy code (IBC) suspension extended till March 31, 2021
Charanya Lakshmikumaran, Partner, Lakshmikumaran & Sridharan Attorneys comments on the Insolvency and Bankruptcy Code (IBC) suspension extension till March 31, 2021.
In order to prevent insolvency applications against companies, given the economic climate brought on by covid 19, the Central Government introduced Section 10A of the Insolvency Code. This prevents the filing of new insolvency applications against companies, effective from March 25 2020, until a date notified by the government, not exceeding 1 year. Section 10A initially suspended the relevant provisions of the Code for a period of 6 months, which was followed by an extension of 3 months in September.
The final extension possible under the current language of the Section, until 25 March 2021 has now also been notified by the Central Government on 22 December 2020. While the suspension until March 2021 was expected, any further suspension will pose significant challenges. Unless the Act is amended, it is unlikely that a further extension of the suspension of the IBC post-March 2021 can occur by a government notification. Additionally, the economic cost of preventing resolution of stressed companies and keeping capital and lenders’ money locked-in will heavily weigh on the Government.