- The changing market dynamics, from crashing stock markets to restaurants, airlines and businesses shutting down, the Coronavirus (“Covid-19”) has hit almost every sector. The pandemic has not only caused global business disruption by halting the international trade, it has also caused major economic unrest affecting the small companies and organizations that were already struggling with financiers and creditors to repay their debts. Due to the status-quo orders of the state and the central government for lockdowns, the business owners are facing difficulties to meet their expenses and obliging their pre-existing liabilities. The third quarter (i.e., October to December[i]) has almost witnessed around 1961 Corporate Insolvency Resolution Process (“CIRP”) against companies. In the current situation, the number is likely to soar with the economic in the country have come down to standstill.
- Amidst the ongoing crisis, effort has made by every regulatory authority (be it Reserve Bank of India, SEBI, Ministry of Corporate Affairs or Courts) to ease the burden on general public by recalibrating their existing regulatory frameworks. In this backdrop, the IBBI has taken certain measures to protect these debt-laden entities and Non-Performing Assets (“NPA”) of the Corporate Debtor that are already facing severe liquidity crunch and provided relaxation to companies facing difficulty to replay their claims.
Amended Legal Provision and Regulations
- Deferred Timelines for Completing CIRP:
The IBBI through a notification dated 29th March, 2020 has decided that the 21 days of lockdown period cannot be used within the outer-limit of CIRP time-frame, where the process has been triggered. The companies will get an extension of 17 days (staring from March 29th) as against the due date for completion of the process.
The present timeline requires the CIRP to be completed within a period of 180 extendable up to 270 days, and in exceptional cases within 330 days (as decided in Essar Steel Judgment). This time frame remains unchanged. This means, even after the extension, the outer limit of completing the CIRP remains same. In this light, a 3rd amendment is made in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 with insertion of Regulation 40C as a Special provision relating to time-line to defer the payment excluding the period of lockdown.
“Regulation 40C: Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.”
The IBBI further clarified that “the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to the lockdown, in relation to a corporate insolvency resolution process. This would, however, be subject to the overall time-limit provided in the Code”.
- Revised IBC Threshold Limit
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