Govt to suspend upto one year IBC provisions that trigger fresh insolvency proceedings

In a major relief to corporate borrowers hit hard by coronavirus pandemic, the government announced its decision to amend the insolvency law.

A man pushes a cart past the Imperial, a twin-tower residential skyscraper complex developed by S D Corp. | Dhiraj Singh |Bloomberg

New Delhi: In a major relief for corporate borrowers hit hard by the coronavirus pandemic, the government has decided to amend the insolvency law to suspend up to one year provisions that trigger insolvency proceedings against defaulters, according to sources.

Further, the sources said amendments to the IBC (Insolvency and Bankruptcy Code) would pave the way for banks to restructure loans.

The sources said an ordinance would be promulgated to suspend three sections of IBC for up to one year and a decision in this regard was taken by the Union Cabinet on Wednesday.

Section 7, 9 and 10 of the IBC would be suspended for six months and the suspension time can be extended up to one year. An enabling provision with respect to extending the time would be part of the ordinance, they added.

Suspension of these provisions could be extended up to one year based on the economic situation going forward.

The effective date of the amendments coming into force would be the date of promulgation of the ordinance, the sources said.