Push for promulgation of ordinances to exclude COVID-19 debt from definition of default.

On Sunday, Finance Minister Nirmala Sitharaman said “No fresh insolvency will be initiated for one year under the Insolvency and Bankruptcy Code”. To given relief to companies defaulting on loans due to COVID-19 pandemic stress and also she push for promulgation of ordinance to amend the Companies Act and the Insolvency and Bankruptcy Code, to exclude the COVID-19 related debt from the definition of “default” and also prevent from insolvency proceeding up to one year.

The companies are having difficulties to repay the loans because their revenue have severely depleted due to lockdown, so the relief for them, to suspension of insolvency proceeding for up to one year and also exclude the COVID-19 related debt from the definition of ‘default’ under Companies Act.

Rajkiran Rai, Union Bank Managing Director and Chief Executive Officer said “There are not ordinary times and extraordinary measures are required” and he also said “There are some businesses like for instance toll collections or those in shopping malls that have had no revenue because of COVID-19 lockdown”.

Some of the question arises on the decision that if the exclusion of delinquencies from the default definition will include loans availed during lockdown or even the debt which are taken just before the government ordered. This will decided soon by the Ministry of Corporate Affairs.

It will be relief for borrower, to not include as a defaulter, that the lenders will not attach assets or sell the company under the insolvency, to recover their loan.

And Finance Minister Nirmala Sitharaman also announced fast- tracking amendments to the Companies Act to further decriminalize it and she also create the regulatory framework for Indian Companies to directly list overseas, proposal that were in the last Companies Amendment Bill, which awaiting parliamentary clearance.