Lockdown effect! Important update about liquidation processes under Insolvency and Bankruptcy Code

In a major development,  the Insolvency and Bankruptcy Board of India (IBBI) has excluded the liquidation timeframe for bankrupt companies from the lockdown period. This comes as a major relief for ongoing liquidation processes under Insolvency and Bankruptcy Code (IBC). A Gazette notification, announced the inclusion of a regulation to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 to effect the same. 

As per the new regulation '47A' to deal with exclusion of period of lockdown, "Subject to the provisions of 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 computation of the timeline for any task that could not be completed due to such lockdown, in relation to any liquidation process." 

The amended regulation comes into effect from March 29 when the Board had published its notification on its site. Under the Insolvency & Bankruptcy Code (IBC), resolution of a bankrupt company should be completed within 330 days. 

The notification said that since the amended regulations provide clarity to the stakeholders in regard to the model time-line in the completion of various tasks in the liquidation process, no person is being adversely affected by giving retrospective effect. 

Further, the board has also excluded the lockdown period from the resolution timeframe of corporate persons. IBBI said that a new regulation '40 C' would be inserted in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, after regulation 40B. 

The special provision relating to timeline says: "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."