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Finance Minister Nirmala Sitharaman on Tuesday introduced in the Rajya Sabha a Bill to replace the Insolvency and Bankruptcy Code (Amendment) Ordinance 2020. The Bill is titled Insolvency and Bankruptcy Code (Second Amendment) Bill 2020.
The Ordinance, which was promulgated on June 5, had prohibited the initiation of insolvency proceedings for defaults arising during the six months from March 25, 2020 (extendable upto one year).
Simply put, no insolvency proceedings can be initiated by either the corporate debtor itself or any of its creditors.
Also read: IBC amendments: Lessons India could have learnt from the world
The Ordinance came as a response to the Covid-19 pandemic, which had created uncertainty and stress for businesses for reasons beyond their control. It was also felt that during the Covid-19-induced lockdown, it may be difficult to find an adequate number of resolution applicants to rescue the corporate debtor who may default in discharging their debt.
While the Ordinance prohibits insolvency proceedings against the Corporate debtor for defaults occuring during the specified period, it does not disallow such action against the personal guarantor of a corporate debtor.
Also read FinMin directs banks to up the game on personal guarantors to corporate loans
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