As the second wave of pandemic COVID-19 intensifies across the country, the government is looking to reintroduce moratorium on new cases being tried under Insolvency and Bankruptcy Code (IBC). The government's earlier suspension of bankruptcy action against corporate defaulters expired on 24 March this year.
According to industry sources, the Finance Ministry has started consultations with the industrialists and industry officials to understand the impact of second wave on businesses. "They also enquired whether reintroducing suspension of IBC would be beneficial at this stage," said an industrialist.
Industry body ASSOCHAM last week had requested the government to reimpose moratorium on taking debt-ridden firms to the NCLT under the IBC till December 2021. The chamber said in a representation that the ministry that it would be imperative to extend the moratorium to ensure that the pandemic "does not wreak havoc" on the economy.
The banks have been planning to take a new set of defaulters to the National Company Law Tribunal (NCLT) to retrieve loans through insolvency process. "Many corporate defaulters have been hiding behind suspension and extracting the maximum possible financial benefits in the last one year," said a banker. The banks are against giving more time for these kinds of defaulters, he added.
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