The Insolvency & Bankruptcy Code (IBC) was suspended for a period of six months with effect from March 25, 2020, by the government earlier, to protect those experiencing financial distress on account of the pandemic.
This means that no insolvency proceedings can be initiated against any borrower for defaults arising on or after March 25, 2020, until such time that the IBC remains suspended.
The government has now decided to further extend the suspension for another three months until the last week of December under the newly inserted Section 10A of the IBC.
While suspending the IBC in June, the government had said it was “difficult to find an adequate number of resolution applicants to rescue a corporate person who may default in the discharge of their obligation”.
Therefore, it decided to suspend Section 7, 9 and 10 of the IBC to prevent the initiation of insolvency proceedings for COVID-related defaults.