The government has reportedly suspended the provisions for triggering insolvency for six months through an amendment to Insolvency and Bankruptcy Code (IBC) 2016 providing relief to small businesses facing insolvency threats amid coronavirus crisis. The government has also sought an approval from the President to allow the new clause as section 10A for sections 7,9 and 10 until further notice, the CNBC TV18 reported citing unidentified government sources. The amendment reportedly also says that the clause would not see an extension over one year.
Sections 7, 9 and 10 of the IBC enable a financial creditor, operational creditor and the promoter, respectively, to initiate insolvency proceedings against a company. Earlier in March, Finance Minister Nirmala Sitharaman had increased the threshold for invoking insolvency to Rs 1 crore from the existing Rs 1 lakh. The government had then also hinted that it could consider suspending the provisions for initiating insolvency for six months if the coronavirus crisis continues.
The bankruptcy code is a one stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement. The code aims to protect the interests of small investors and make the process of doing business less challenging.
Meanwhile, the death toll in India due to coronavirus jumped to 681 on Wednesday, according to latest data by the Ministry of Health and Family Welfare. The total number of confirmed coronavirus cases in India have surged to 21,393, as per the Health Ministry. These include, 16,454 active cases, 4,257 cured or discharged, 1 migrated and 681 deaths in the last 24 hours.