The Insolvency & Bankruptcy Code(IBC) could hardly exist in full fledged manner for approx. 3 years and 4 months before it was overshadowed with suspension of provisions related to Corporate Insolvency Resolution Plan(CIRP) & Liquidation due to Covid-19 Pandemic.
Suspension Period
The suspension of Section 7, 9 & 10 of IBC for one year, by way of initial 6 months and an extension of 6 months, is to end finally on 25th March,2021.
Section 10A
The suspension was effected by way of insertion of Section 10A of IBC whereby new defaults were also excluded from being opted for initiating insolvency during such suspended period or any given point of time even after the suspension as this was a permanent exclusion period.
It is also being claimed that the NPA’s will see a different dimensional surge and the situation can be even grave than expected by financial pandits so far.
New Changes
Much have been talked about new avatar of IBC in a short to mid term especially with many amendments are still on the verge of happening.
The prominent changes , amongst many, can be summarised as below:
a. MSME Resolution
b. Pre Pack Deals
c. Committee of Resolution Professionals in NCLT
These changes can result into a paradigm shift into the ecosystem of IBC.
Threshold Limit for CIRP
As a measure to safeguard industry from the wrath of insolvency and defaults in debt, the threshold limit which used to be Rs 1 lakh was also enhanced to Rs 1 Crore. This provided a cushioning period to the financial ridden companies with the outburst of Covid-19 Pandemic.
It is pertinent to note that globally, the threshold limit for invoking CIRP is at par what India introduced initially as Rs 1 lakh in December,2016.
It has been also being debated as to what shall be the fate of such an enhanced limit especially after the suspension will be over, but it is significant to note that even prior to Covid-19, there was a recommendation to enhance the limit as under:
a. for MSME to Rs 5 lakhs and
b. for others to Rs 50 lakhs.
Hence, going by such reporting and also global trend for the threshold what it existed before suspension of aforesaid provisions of IBC, there is a strong chance that it shall be reduced but it cannot remain atleast Rs 1 Crore forever even after the suspension ends.
There may be a high possibility that the threshold limit may be reduced after some time as Covid-19 spike has again surfaced for last 20days.
Whatever be the notifications, which is expected to come within next two days, it is for sure that henceforth the IBC shall have a different saga and format altogether then what it was used to be previously especially when “bad bank” is also going to work simultaneously in debt sector.
IBC Assessments
The companies which have been sitting over debts or even which have to recover from other buyers of goods or services are also waiting for the suspension to be over.
There has been a sudden increase of pre-assessment enquiries under IBC and which is mounting on daily basis from 1st March,2021 onwards under a strong anticipation that they should be ready with their IBC assessments so that they can opt for remedy without any further delay and recover their debts even knowing that IBC is not a recovery mechanism but then too it has had been used in that manner alone.
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