SUSPENSION OF INSOLVENCY AND BANKRUPTCY CODE – BUNDLING DEVOID OF ANY THEORY FOR POST-COVID IMPLICATIONS?
By Yatindra Choudhary
The Insolvency and Bankruptcy Code, 2016 was implemented at lightning speed within one year of it being introduced in Lok Sabha as it was considered as ‘Light at the end of tunnel’ in the context of smoother resolution process of debts. But the code was suspended for one year from March 2020 in the light of the Covid-19 pandemic and protection of already disrupted small business enterprises and others. The article analyses the effect of pandemic on recovery of debts and how IBC suspension though paving way for revival of economic structure and relief for financially struck businesses did not talk about the effect it will have on banks in long run as it will pile up the aggravated NPA accounts/loans and CIRPs (Corporate Insolvency Resolution Process) too. The suspension which relieved the businesses was quiet about the burden it will put on banking institutions that were already reeling under the delinquency of loan defaults. The battle with Covid-19 is not only to save the country and its people but also to ensure that the banking channels are working round the clock to cater to the needs of the public as well as the financial market. The banking system is the backbone of any country, and its failure or slowdown could lead to multiple issues for developing countries like India. Post-covid, the challenges would be manifold.
Keywords: IBC, Recovery, Suspension, Covid-19, Banks, Debts, Restructuring
©2020- Lex Humanitariae: Journal for a Change