Covid -19 Update: Extension of application of IBC Amendment Act 2020

As the shadow cast by the pandemic continues to loom over us, the Ministry of Corporate Affairs, on 22nd December 2020, has announced a further three month extension to the application of Section 10 A of the Insolvency and Bankruptcy Code, 2016. See our article on the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020here. While the respite granted originally was already elongated to one year, that is, till 24th March 2021, applications under Sections 7, 9 and 10, of the IBC, to a cap of Rs. 1 crore, would now remain suspended till 31st March 2021.

The Amendments 

The government, sensitive to the hindered cash flows of various companies, has by now introduced three amendments to ameliorate the situation. The order dated 5th June 2020, which had excused corporate debtors from the start of the lock down period (25th March 2020) by raising the minimum recovery amount of Rs. 1 Lakh to a hundred times, was given a three month extension till 25th December 2020 and another three month extension thereafter. Thus, as COVID-hit sectors continue to be crippled with businesses trying to regain their lost footing, operational creditors/financial creditors remain unable to approach NCLT under IBC to recover their due.


Despite the onslaught of amendments, no attempt has been made to tie the loose ends of Section 10A which while focusing on protection, appears dangerously close to ignoring the balance of rights. While respite ought to be granted, only those defaults pertaining to COVID should be allowed. Window of operations for ‘normal’ financial loans/debts should be excluded from this purview. These amendments and extensions are now being abused instead of being beneficial to the industry houses and businesses.

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