New Delhi The Central Government has taken a major decision, approving an important proposal of the Ministry of Corporate Affairs. Under this, the default case of any company will not be referred for insolvency process under the Insolvency and Bankruptcy Code ie IBC for the next one year. This decision taken in the interest of companies will provide relief to companies from being declared bankrupt for one year. The government is also preparing relief for companies. This package can be given in several stages rather than outright. The government is trying to recover the damage caused by the corona virus.
This move of the government will provide immense relief to those companies, who will have difficulty in repaying loans even after the lockdown due to Corona crisis. A lockdown has been declared in the country until May 3 to prevent Corona virus infection. This has adversely affected the earnings of many companies.
Significantly, Rajneesh Kumar, chairman of the country's largest lender State Bank of India (SBI), has said many times that in some cases, companies should be given time to repay the loan, instead of taking them through the insolvency process. Deepak Parekh, chairman of HDFC Ltd, the leading private lender for property, has also advocated giving companies a chance to repay their debts rather than taking them through the insolvency process.
Addressing the realty companies recently, Parekh even said that it is better to give the companies a little time to repay the debt by going through the insolvency process and getting caught in the legal bets. More importantly, under the insolvency process, banks and other lenders recover in a relatively short period of time, but often receive such a small amount that they have to repent. Therefore, many companies are expected to get a big relief from this move of the government.
