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Govt. extends suspension of IBC till March 2021

The suspension of Insolvency and Bankruptcy Code, 2016 (IBC) has been extended for another three months. Finance Minister Nirmala Sitharaman announced during a virtual interactive session with Bangalore Chamber of Industry and Commerce (BCIC) on 21 December 2020 that the insolvency and bankruptcy law will remain suspended till March 2021 now.

"When the lockdown was announced, there was constant engagement with industry. So many deadlines were postponed and many compliances relaxed. Even the suspension of the IBC has been postponed even further from December 25, I think we have moved to saying that will be in abeyance till March 31, 2021," Sitharaman said.


"So, the entire year has had the IBC suspended, rightfully so because every industry has gone through major stress because of the pandemic and nobody could be drawn towards the insolvency process for problems that may have occurred during the pandemic," she added. The Ministry of Finance is yet to officially announce the above extension.


The outbreak of COVID-19 pandemic and the suspension of new proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) has resulted in a sharp slow-down in resolution process and consequently, the realisation for financial creditors has declined. During first half of the current fiscal, number of cases admitted declined by 82 per cent i.e. 161 cases compared to 889 cases in the first half of the Financial Year 2019-20.


Due to suspension of new proceedings under the IBC, financial creditors may realise just Rs 60,000-65,000 crore in the current fiscal through successful resolution plans from the Insolvency and Bankruptcy Code, 2016, as compared to about Rs 1 lakh crore in the last financial year 2019-20, registering a decline of up to 40 per cent. Moreover, realisations for financial creditors could continue to suffer in the Financial Year 2021-22 due to suspension of fresh insolvency proceedings till December 25, 2020, for accounts which defaulted after March 25, 2020, which had been extended earlier for three more months.


New insolvency proceedings that will be initiated in FY22, once the suspension on fresh insolvency proceedings is lifted, are unlikely to get resolved in the same fiscal, given the typical average time-period seen for CIRPs to conclude with a resolution plan is quite high (currently at 433 days). Thus, ICRA expects both FY21 and FY22 to see relatively lower realisations from CIRPs for lenders compared to the preceding years.

 

For the Official Notification, view the file below:

Gazette of India Noti. No
. SO 4638(E) da
Download SO 4638(E) DA • 747KB

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