The 21-day lockdown imposed to contain the spread of coronavirus will be excluded from timelines mandated by the Insolvency and Bankruptcy Code (IBC) in the resolution process. The Insolvency and Bankruptcy Board of India (IBBI) has inserted a Regulation 40C in the insolvency law, called the Insolvency and Bankruptcy Board of India Regulations 2020.
"Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process," the new Regulation 40C states.
The new regulation will come into effect from March 29, 2020, IBBI said in a statement on Sunday. This means that troubled companies will get a breather of 17 days.
"This is a welcome measure to exclude lockdown period from computation of insolvency process timeline. IBBI has always been responsive to the constraints faced in the operating ecosystem and sorting out these issues promptly, for successful implementation of Bankruptcy Code," said Hari Hara Mishra, Director, UV ARC.
Originally, the insolvency law granted 180 days to finish the resolution process, which was extensible by 90 more days - 270 days in total. Presently, the IBC gives companies 330 days to finalise the resolution process, including litigation and other judicial processes. Failing which, the company will have to go to liquidation.
"Suppose, some company was completing 330 days or more on April 15, the Resolution Professional would have filed liquidation plan. Now he may explore a resolution plan if acceptable in next three weeks," Mishra said.
In its quarterly update, IBBI revealed that there were 1,961 cases in IBC with December, and the average time for resolution was 350 days, instead of the mandated 330 days. The bankruptcy court, National Company Law Tribunal (NCLT) has notified on March 23 that all its benches would remain closed till March 31 for judicial work and only unavoidable urgent matters would be examined. Cases under IBC would not be considered urgent and would be taken only after NCLT resumes normal functioning.