Govt extends suspension of IBC by three months till December 2020

The government has decided to extend the suspension of Sections 7,9, 10 of the Insolvency and Bankruptcy Code (IBC) for a period of three months till 31 December 2020 in an order issued today.

Announcing the extension, the finance minister Niramal Sitharaman said in a tweet that the extension of suspension of IBC reinforces the government’s commitment to protecting businesses. “It also gives companies breathing time to recover from financial stress,” she said.

The extension of the suspension till 31 December 2020 is now co-terminus with Reserve Bank of India’s (RBI’s) new restructuring framework under which companies could seek a 2-year moratorium by applying for the restructuring plan by 31 December 2020.

Meanwhile, some experts have questioned the rationale of suspension of Section 10 of the IBC. Under Section 10, a corporate debtor could initiate insolvency proceeding against itself.