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Govt extends suspension of fresh insolvency proceedings under insolvency law by 3 months

25 Sep 2020 Evaluate

The government has extended the suspension of fresh insolvency proceedings under the insolvency law by three months till December 25. This provides ‘breathing time’ for companies to recover from coronavirus pandemic-induced financial stress. The six-month period of suspension, which was effective from March 25, was to end on September 24.

The suspension of fresh proceedings under the Insolvency and Bankruptcy Code (IBC) has been extended for a ‘period of three months from the September 25, 2020’. An ordinance was promulgated in June for suspension of fresh insolvency proceedings and the same came into effect from March 25 -- the day when the nationwide lockdown had come into effect. A bill to replace the ordinance that had amended the IBC was cleared by Parliament.

The ministry, which is implementing the IBC, has suspended Section 7, 9 and 10 to provide relief for companies reeling under the impact of the pandemic. Sections 7, 9 and 10 deal with initiation of corporate insolvency resolution process by a financial creditor, operational creditor and corporate debtor, respectively.

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