Govt to resume fresh insolvency proceedings under bankruptcy law from March 25

The government is likely to begin fresh insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) from March 25 after the current suspension comes to an end.

The government had last year suspended fresh insolvency proceedings for six months from March 25, when a nationwide lockdown was imposed to curb the spread of coronavirus infections. The suspension was extended twice by three months till December 24, 2020 and then March 24, 2021.

The government is unlikely to extend the suspension further as a return to normalcy is needed, and Finance Minister Nirmala Sitharaman is considering a proposal for the same, Bloomberg reported citing sources.

The move is expected to bring a new wave of insolvency cases.

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Last year, the Corporate Affairs Ministry had suspended Section 7, 9 and 10 of IBC to provide relief to companies reeling under the impact of the pandemic. Sections 7, 9 and 10 deal with initiation of corporate insolvency resolution process by a financial creditor, operational creditor and corporate debtor, respectively.

Earlier on Tuesday, the Supreme Court turned down pleas from various trade associations and corporate bodies seeking an extension of six-month loan moratorium offered by the Reserve Bank of India in view of the pandemic. The apex court, however, ruled that there will not be any interest on interest or penal interest on any amount during the moratorium.

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