The Rajya Sabha on Saturday passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020, which seeks to replace the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020.
Speaking in Parliament after moving the motion, Union Minister Nirmala Sitharam said, the intention of the insolvency and bankruptcy code is to keep companies a “going concern” and not liquidate them.
The bill will replace an ordinance promulgated in this regard on June 5 which had prohibited the initiation of insolvency proceedings for defaults arising during the six months from March 25, 2020 (extendable up to one year).
The Bill mandates that a default on repayments from March 25, the day when a nationwide lockdown began to curb the spread of coronavirus, would not be considered for initiating insolvency proceedings for at least six months.
The ordinance came in response to the Covid-19 pandemic, which had created uncertainty and stress for businesses for reasons beyond their control. It was also felt that during the COVID-19-induced lockdown, it may be difficult to find an adequate number of resolution applicants to rescue the corporate debtor who may default in discharging their debt.