NEW DELHI: The Lok Sabha on Monday passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020, that prohibits initiation of fresh insolvency proceedings against companies under stress due to the spread of Covid-19 pandemic.
Finance Minister Nirmala Sitharaman said the Ordinance brought on June 5, suspending the application of sections 7,9 and 10 of the Code, was a timely one. These sections deal with initiation of corporate insolvency resolution process by financial creditor, operational creditor and corporate debtor, respectively.
“We had to prevent any company, stressed because of Covid-19, from being pushed into insolvency… We did not want to hurt any other proceedings initiated before March 25 due to the reasons apart from those associated with the Covid-19 fallout,” she said.
The Rajya Sabha had passed the Bill on Saturday. The Bill seeks to replace an Ordinance promulgated to provide relief to pandemic-hit firms in June this year.
The Ordinance prohibited initiation of insolvency proceedings against companies for their defaults for six months starting March 25. The protection period, which ends on September 25, is, however, extendable up to one year.
The whole approach is to provide immediate relief and in the later phases, companies unable to be aided by hand-holding will also get relief, the minister said.The Lower House also discussed the Epidemic Diseases (Amendment) Bill, 2020, which has already been passed by the Rajya Sabha.