Insolvency and bankruptcy code (second amendment) act, 2020 notified w.e.f. 5 June 2020
September 24, 2020
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2020 received the assent of the President on 23 September and is deemed to have come into force from 5 June 2020. The Insolvency and Bankruptcy Code (Second Amendment) Ordinance, 2020 accordingly stands repealed.
The Amendment Act provides for suspension of the initiation of corporate insolvency resolution process under a new Section 10A, which provides that notwithstanding the provisions of sections 7, 9 and 10 of the Code, no application shall be filed against a corporate debtor for any default arising on or after 25 March 2020 for a period of six months or a further period not exceeding one year from such date, as may be notified. The proviso to this section clarifies that no application shall ever be filed for any default occurring during this period. However, any default occurring prior to 25 March 2020 will not be given this relaxation.
Further, a new sub-section (3) to section 66 provides that the RP shall not file an application under sub-section (2) in respect of a default of a director or partner of the CD against which initiation of corporate insolvency resolution process is suspended under section 10A. [The default being that (a) before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reasonable prospect of avoiding the commencement of a corporate insolvency resolution process in respect of such corporate debtor; and (b) such director or partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor].
To refer to the gazette notification of the Insolvency and Bankruptcy Code (Second Amendment) Act 2020, dated 23 September 2020, click here.
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