The Rajya Sabha on Saturday passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020, whereby fresh insolvency proceedings will not be initiated for at least six months starting from March 25 amid the coronavirus pandemic.

Moved by the Finance Minister Nirmala Sitharaman, the Bill amends the Insolvency and Bankruptcy Code 2016 which provides a time-bound process for resolving insolvency in companies and among individuals.

It seeks to temporarily suspend the initiation of the corporate insolvency resolution process (CIRP) under the Code and mandates a default on repayments from March 25, the day when a nationwide lockdown began to curb the spread of coronavirus, would not be considered for initiating insolvency proceedings for at least six months.

The central government may extend this period to one year through notification.

It is a replacement for the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 promulgated in June this year.

Replying to a debate on the Bill in the House, Finance Minister Nirmala Sitharaman said the intention of the IBC is to keep companies a “going concern” and not liquidate them.

BJP MP Arun Singh said the amendment to Insolvency and Bankruptcy Code, 2016 was a “remarkable and bold step” by the Narendra Modi government.  

Insolvency is a situation where individuals or companies are unable to repay their outstanding debt.