IBC to remain ‘rightfully’ suspended till FY21 end: FM SitharamanDecember 21, 2020
“Gradually even the suspension of the IBC has been postponed even further from 25th of December, I think up to March 31, 2021,” Sitharaman said while addressing the Bangalore Chamber of Industry & Commerce via video conferencing.
She said IBC will remain suspended for the entire current financial year. “Rightfully so, because every industry has gone through major stress because of the pandemic. And nobody could be drawn towards insolvency process which may have occurred during the pandemic,” she said.
The finance minister said not only the compliances but even the tax payments that companies have to make were postponed so that nobody is put to difficulty, she said.
In June, in order to give a breather to companies facing stress due to the Covid-19 pandemic, the government had brought an Ordinance exempting them from facing corporate insolvency resolution proceedings against any default arising on or after March 25, 2020, for a period of six months. This suspension was extended in September for another three months, ending December 24.
The IBC law empowers the government to issue a notification to extend the suspension for a period not exceeding one year.
This suspension of IBC is not applicable to any default committed before March 25, 2020. The three sections which stand suspended include Section 7, 9, 10. A new Section 10A was earlier added to suspend the IBC.
The government had said earlier that it was difficult to find adequate resolution applicants to rescue the corporate person who may default in discharge of their debt obligation and that the Covid-19 pandemic had impacted the economy all over the world creating uncertainty and stress for businesses for reasons beyond their control.
With a significant portion of insolvency cases facing liquidation since the outbreak of Covid-19, experts feel that there is a lack of investor interest in stressed assets at present and further extension of the suspension may give a breather to many companies.