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RAJYA SABHA PASSES INSOLVENCY AND BANKRUPTCY CODE (SECOND AMENDMENT) BILL, 2020

RAJYA SABHA PASSES INSOLVENCY AND BANKRUPTCY CODE (SECOND AMENDMENT) BILL, 2020

Context

Recently, the Parliament passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020.

Key features of the Bill

  • It amends the Insolvency and Bankruptcy Code 2016 which seeks to provide a time bound process for resolving insolvency in companies and among individuals.
  • It seeks to temporarily suspend initiation of the corporate insolvency resolution process(CIRP) under the Code. 
  • It replaces the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 which was promulgated in June 2020.
  • Insolvency is a situation where individuals or companies are unable to repay their outstanding debt.
  • As per the Bill, when a default occurs, the Code allows the creditors of the company or the company itself to initiate CIRP by filing an application before the National Company Law Tribunal (NCLT). 
  • It provides that for defaults arising during the six months from March 25, 2020, CIRP can never be initiated by either the company or its creditors. 
  • The central government may extend this period to one year through notification.

About National Company Law Tribunal (NCLT)

  • It is a quasi-judicial body in India that adjudicates issues relating to Indian companies.
  • It was established under the Companies Act 2013 and was constituted on 1 June 2016.
  • It was based on the recommendation of the V. Balakrishna Eradi committee on law relating to the insolvency and the winding up of companies.

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