The union government has decided to extend the suspension of the Insolvency and Bankruptcy Code (IBC) till 31 March 2021, to help businesses cope with major stress posed by the Covid-19 pandemic, Union Finance Minister Nirmala Sitharaman said.
“The suspension of the IBC has been postponed even further, from 25 December to, I think, 31 March 2021,” the Sitharaman said while addressing the Bangalore Chamber of Industry and Commerce (BCIC) via videoconferencing.
“The IBC has been suspended for the entire year, and rightly so because every industry has gone through stress because of the pandemic and nobody could be drawn towards insolvency process which may have occurred during the pandemic.”
Certainly, Sitharaman’s remarks give a huge relief to the businesses experiencing distress on account of the unprecedented situation because of the Covid-19 crisis as the present government order to keep the insolvency code in abeyance was due to expire on 25 December.
In an earnest attempt to provide relief to the industry adversely impacted because of the pandemic, the government had suspended fresh proceedings under the IBC for loan defaults on or after 25 March for six months. On 25 March, the government imposed a countrywide lockdown and relief measures including several compliance relaxations and extensions were announced soon after. The suspension was further extended by three months until 25 December.
It is worth noting that the suspension of the IBC is not applicable to any default committed before 25 March 2020. Further, the IBC code empowers the Centre to issue a notification to extend the suspension for a period not exceeding one year.
The finance minister mentioned that the Centre has ensured that small and medium (SME) enterprises got the adequate fund to carry on business operations through the emergency credit line guarantee scheme, even as they avoided bankruptcy cases because of the IBC suspension.
Sitharaman further added that the government was ready to help industries, especially the SME sector, in fast adoption of technology such as automation, artificial intelligence (AI) and big data management. “India, after all, is one of the leaders in automation and AI, and the skilled manpower goes abroad to add strength to the AI work that happens in developed economies. Now if our soft skills are all in those areas, we should benefit from it and not allow the entire soft skills that people have for benefiting others,” media quoted the FM as saying.