Categories: Insolvency

IBBI CIRP Regulation by relaxation timeline due to COVID-19

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IBBI amends CIRP Regulation by relaxation timeline due to COVID-19 outbreak

The press note on the lockout notification reads as follows: In order to solve this dilemma, the IBBI amended the CIRP Regulations to ensure that the lockout period enforced by the Central Government following the outbreak of COVID-19 is not to be counted for the purposes of the time-line for any operation that could not be completed as a consequence of the lock-down.

IBBI amends the CIRP Regulations to include relaxation due to the COVID-19 outbreak in the corporate insolvency resolution process

However, it would be subject to the overall time limit set out in the Code. Why does the word ‘subject to the Code’s complete time limit? Will that mean you have to stick to the periods of 180/270/330 days.
The only relaxation is in respect to the prescribed timelines for the different activities for which relaxation was given. Was my interpretation inter alia LINK

The IBC (Amendment) Ordinance, 2020

The Ordinance prohibits the initiation of insolvency applications for defaults occurring within six months of March 25, 2020. (extendable up to one year).
A director or a partner may be made responsible if, despite knowing that insolvency proceedings are unavoidable, he failed to exercise due diligence in reducing the possible loss to creditors. This Ordinance removes above said provision for defaults in the above mention period.

What are the Key Issues & its Analysis

The suspension of the insolvency resolution process raises several issues.

1. This IBC ordinance is prohibiting resolution even in cases where that may be the best way to preserve value of assets.
2. Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 removes the option of a debtor to avail of the insolvency resolution process by way of restructuring.
3. IBC ordinance 2020 is unclear why insolvency proceedings against identified precisely specified defaults have been prohibited forever.

This is controversial issue that whether a personal guarantor to a corporate debtor should be subjected to insolvency proceedings for defaults for which insolvency proceedings are not allowed against the debtor

Rajput Jain & Associates

Tags: COVID-19 outbreakrelaxation due to COVID-19 outbreak in the CIRPTimeline of CRP

6 years ago

Rajput Jain & Associates

Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders. Rajput jain & Associates, a professional firm, offers its clients a full range of services, To serve better and to bring bucket of services under one roof, the firm has merged with it various Chartered Accountancy firms pioneer in diversified fields. We have associates all over India in big cities. All our offices are well equipped with latest technological support with updated reference materials. We have a large team of professionals other than our Core Team members to meet the requirements of our prospective clients including the existing ones. However, considering our commitment towards high quality services to our clients, our team keeps on growing with more and more associates having strong professional background with good exposure in the related areas of responsibility.