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COVID-19’s impact on IBC

May 14, 2020

Insolvency and Bankruptcy Code (IBC), is hit by the uncertainties in the awake of the pandemic, several companies under the bankruptcy resolution process may see potential buyers pulling out.

The major concerns rests for the resolution plans required for cases like IL&FS, Dewan Housing Finance, Jaypee Infra, Bhushan Power & Steel, Alok Industries and Reliance Communication. Potential buyers have sought for more time, in order to arrive at their decision. The valuation and viability poses a question which yields bleak certainties. The plans which were approved by creditors and NCLT have been caught up in the vicious circle of reconsideration.

India’s Insolvency and Bankruptcy Code, bankrupt firms get up to 330 days to complete the resolution process. More than 1,900 companies are currently undergoing the resolution process. Meanwhile on the day lockdown began the finance minister announced that the monetary threshold of default for filing an application for initiation of corporate insolvency resolution process under the IBC shall be increased to INR 1,00,00,000 moving ahead of previously declared INR 1,00,000. The objective is to prevent the MSME’s from being in default under the said Code. Under the Code there may be suspension of S.7,9,10 for a period of Six months keeping in the view the Lockdown 2.0

Other than economic relief packages, plethora of bankruptcy reforms may need to be undertaken, to help both big and small companies which nearing to distress. Simultaneously, impetus and reforms are needed in the financial sector to not only prevent any bankruptcies in the sector but to also aid them in giving relief to the businesses.

Arunima Shastri, Assistant Professor, Unitedworld School of Law (UWSL)

Disclaimer: The opinions / views expressed in this article are solely of the author in his / her individual capacity. They do not purport to reflect the opinions and/or views of the College and/or University or its members.

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