CORPORATE INSOLVENCY RESOLUTION PROCESS POST COVID-19 CASE FOR A CARVE-OUT IN IBC FOR RESOLUTION APPLICANTS ON ACCOUNT OF FORCE MAJEURE EVENT?

Although “maximization of value” is one of the main objectives of IBC, it is equally important to ensure that a company is not liquidated for lack of investors/resolution applicants in view of a force majeure event

- Jyoti Singh

The ongoing economic recession in India, like the rest of the world, due to the COVID-19 pandemic and the consequential longest ever complete nationwide lockdown, has not only adversely impacted the financials and cash reserves of Indian companies as well as their ability to service debts, but also severely hampered the chances of revival of corporate debtors which are either presently undergoing corporate insolvency resolution process (“CIRP”) or, the CIRP having been concluded, their approved resolution plan is under implementation.

Statutory and judicial relaxation under the Insolvency and Bankruptcy Code, 2016 (“IBC”), in view of COVID-19

• With the announcement of complete nationwide lockdown in India on March 24, 2020, several Micro, Small and Medium Enterprises (“MSMes”) were faced with the imminent threat of going insolvent, which led to the Ministry of Corporate Affairs (“MCA”) issuing a notification on March 24, 20201, thereby notifying one crore rupees as the minimum amount of default under Section 4 of the IBC.

• Further, the Insolvency and Bankruptcy Board of India (“IBBI”) also followed suit by urgently amending the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, vide notification dated April 20, 20202, thereby inserting Regulation 40C which provided for the exclusion of period of lockdown while computing timelines for an activity in relation to CIRP. However, this special provision was made subject to the provisions of IBC.