Insolvency and Bankruptcy (Second Amendment) passed in Rajya Sabha
The Rajya Sabha has passed the Insolvency and Bankruptcy code (second Amendment) Bill 2020. Under the new provisions, fresh insolvency proceedings will not be started for the next six months taking the Covid-19 pandemic into account.
Why Insolvency proceedings has been suspended?
The companies are under crisis amid the COVID-19 pandemic restrictions. These restrictions have also affected their ability to pay back the interest and loan. The micro small and medium enterprises have also been affected in the situation. Under the relief measures, Government of India had increased the threshold for initiating the insolvency process. Also, The Reserve Bank of India allowed Moratorium on all loans till August 2020. Despite these steps, number of non-performing assets were increasing. Thus, the insolvency proceedings has been suspended in order to provide some relief to the companies to payback the loans.
Insolvency and Bankruptcy code
The Insolvency and Bankruptcy Code, 2016 is the bankruptcy law of India. It consolidates all the existing framework by creating a single law for the insolvency and bankruptcy. It was introduced to resolve timely the insolvency proceedings of the Individuals, Corporate, firms in partnership. Evaluation and viability is determined and completed within 180 days of its initiation under it. The National Company Law Tribunal is the adjudicating authorities under the code to compete the insolvency proceedings.
The code has consolidated following laws:
- SARFESI Act- the Securitisation and reconstruction of financial assets and enforcement of security interest act which allowed the banks and other financial institution to auction the residential or commercial properties of Defaulter in order to recover the loans.
- Companies Act that focused on liquidation and winding up of the company.
- The recovery of debt due to banks and Financial Institutions act 1993 to provide for the establishment of Tribunals for expeditious adjudication and recovery of the loans.
After the code has been introduced, around 4452 cases has been dismissed at the pre-admission stage of the code and the maximum amount that has been recovered stands at rupees 492500 from 21 countries.