The period of lockdown imposed by the central government to prevent the spread of coronavirus will be excluded from the timelines allowed under the Insolvency and Bankruptcy Code (IBC), the Insolvency & Bankruptcy Board of India (IBBI) said on Sunday.
The IBBI inserted a new Regulation 40C in the code, called the Insolvency & Bankruptcy Board of India Regulations, 2020.
The new Regulation 40C reads, “Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the code, the period of lockdown imposed by the central government in the wake of COVID-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.”
This new regulation will come into force from March 29, 2020, IBBI said. The note added that the notification would be published in the Gazette of India as soon as the government press accepts the same for publication.
While the total timeline for resolution allowed under the IBC was originally 180 days, extendable up to 90 days (totalling 270 days), the endless litigations often caused cases to drag much longer than the intended timeline. To ensure a more time-bound resolution of cases being tried under this regulation, the Union cabinet in July 2019 introduced amendments to the code, mandating the resolution process to be completed within 330 days, including litigations and other judicial processes.
As per the IBBI’s quarterly update, there were 1961 cases in IBC as of December 2019, and the average time for resolution was 350 days, greater than 330 days currently allowed under the regulation.
The National Company Law Tribunal (NCLT), which handles all IBC related matters, in addition to the other cases of anti-trust, amalgamations, competition law, and others, had said in a public notice on March 15 that in order to prevent the spread of the COVID-19 virus, it would restrict its functioning.Thereafter, the tribunal notified on March 23 that all benches would remain closed until March 31 for the purpose of judicial work, and would examine only unavoidable urgent matters, and that IBC cases would not be treated as urgent matters and taken up only when normal functioning resumes.