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New Delhi: The Union Cabinet on Wednesday recommended an ordinance for amendment of insolvency and Bankruptcy Provide codes and relief for debt defaults after March 25, initially for six months.
Defaults in repayment The loan by The companies – Except for financial services – until the end of September, which can be extended for another six months, will not count against default under the Insolvency and Bankruptcy Code (IBC). It also prohibits the introduction of any insolvency action by banks or other creditors, such as suppliers, in the National Company Law Tribunal.
A formal announcement by the Ministry of Corporate Affairs is expected in the next few days.
While the amendment to the IBC would provide relief to the corporate sector, it has not gone down well with lenders and insolvency professionals. A top banker said the move was not required as a reserve Bank of India Had declared a moratorium, declaring a moratorium.
In addition, bankers said, this would upset the payment culture, which had improved in recent years due to fears of lenders implementing the IBC, which could result in the promoter being evicted.
“Pressing the pause button on the classification of non-performing assets of lending after March 25 can cause many losses. This bus is spreading in the RBI area and sets a dangerous precedent. Sumant Batra, managing partner of law firm Saffron Das, said it posed a risk of misuse by investigators to borrowers.
However, the government has argued that steps are necessary to ensure that businesses do not get back to full capacity immediately after the lockdown is lifted. During the lockdown, most businesses had lost significant amounts of revenue.
Separately, the government is creating a simple framework for insolvency solutions for micro, small and medium enterprises, which will have fewer procedures to comply with and come out of the framework over a shorter period of time. Under the current mechanism, the corporate insolvency resolution process would have to be completed within a maximum of 270 days.
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