Month: May 2020

CAN U INVOKE THE IBC CODE DUE TO IMPACT OF COVID 19 LOCKDOWN?   AMENDMENT OF IBC,(INSOLVENCY AND BANKRUPTCY AMENDMENT)ACT,2020- IMPACT OF COVID 19 LOCKDOWN.

 

The Ministry of Corporate and Finance Affairs, passed an Amendment to IBC,(Insolvency and Bankruptcy Amendment)Act,2020. And the act to come into effect from the date of Notification issued In the Official Gazzette.

As per the new amendments passed by the central Govt. in the course of Lock down and Shut down of Business operations nationwide/Worldwide due to COVID-19 pandemic effect. The IBC code itself cannot be invoked for the resolution process for a period of 6 months ie., certain provisions of the IBC Code such as sec.5,7,8,14, 29A etc., have been suspended for a period of 6 months and this change will be even for the IBC proceedings already initiated but the matter is pending for admission or no IRP/RP have been appointed prior to the amendment act shall not proceed further for a period of 6 months. But the Amendment does not give clarity on the cases which are already filed, admitted in NCLT and IRP/RP appointed for the Resolution process which have been going through the Process of resolution.

Apart from the certain important provisions of the act being kept under suspension, the amendment has also increased the limit of amount fromRs.1,00,000/- (Rupees one lakh) to Rs.1,00,00,000/- Rupees One crore to approach the IBC for resolution. It means, if your (Operational Creditor or Financial Creditor) claim against any corporate debtor is upto or within the limits of Rs.1,00,00,000/- (Rupees one Crore), you cannot approach NCLT for Resolution against the Corporate debtor.

The amendment of sec.11 permits for claims by one corporate debtor against other corporate debtor. In case if there are any claims by the one corporate debtor against another corporate debtor then such claims can be made by such corporate debtor against whom any such Insolvency proceedings are being initiated under the code.

The suspension of IBC code was issued in the wake of COIVD 19 Lockdown situation where Business could not run and to save the companies from going on into liquidation process. As the aim of the Act is to take a course of resolution and keep the Business alive and not to close down the Business permanently.

HOW FORCE MAJEURE CLAUSE HELPS YOU IN YOUR BUSINESS CONTRACTS DURING THE COVID-19 LOCKDOWN SITUATION.

FORCE MAJEURE- means an unforeseen event or irresistible force beyond the control of any person or state, which makes it impossible to fulfill and international obligation and is a situation refered to as emergency.

We have recently seen such an emergency situation called as COVID-19, Pandemic, which is even declared by WHO,(World Health Organization) as Emergency situation.

Force majeure in any given situation is controlled by the law governing the contract, rather than general concepts of force majeure. The law of the contract often specified by a choice of law clause in the agreement, and if not is decided by a statute or principals of general law which apply to the contract.

Force majeure is a common clause in Contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as war, strike, riot, crime, epidemic, pandemic or an event described by the legal termed as an Act of God,  prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure.

Some causes might be like borderline cases, these must be assessed in light of the circumstances.

Any circumstances that are specifically contemplated (included) in the contract—

For example:

If you are in a Business and have entered into a Contract with the other party to perform an obligation by promising that you will be delivering certain assigned goods or services to the contracting party within a certain time bound period and due to the lockdown situation if you have not been able to conclude the contract completely by performing your part of obligations under the contract, then the other contracting party shall have a right to seek for damages against you either for late delivery or Non-performance of contract due to lock down situation of covid-19. Then How can u protect yourself from this kind of situation?

If your contract is having a Force Majeure clause as mentioned above then both the parties will be protected and you will get an exemption for this lockdown situation due to which you could not have performed your part of contract, also you can on mutual negotiation with the other contracting party seek for time extension so that the contract gets concluded between the parties.

On the hand, if your contract does not have FORCE Majeure Clause, mentioned under the agreement entered between both the parties. Then you will not have the protection as mentioned earlier. So to avoid the frustration of contract you can try to negotiate with the other party & Conclude the contractual obligations.

Therefore it is very much necessary that you should have these clauses as part o0f your Business contracts to protect oneself from the unforeseen situations.

DO U HAVE TO PAY RENT DURING THE COIVD-19 LOCKDOWN SITUATION?

If u are a tenant and staying in a rented house, apartment unit, office space or staying in a P.G. Accommodation. Then you don’t have to worry, even if u have not paid the rent then your landlord cannot evict you from the place.

While the Entire country has come to a standstill because of the Govt. Orders imposed to Contain the Pandemic COIVD -19 and if your landlord is demanding rent from you for the lockdown period. Then what you can do in this situation?

In view of lockdown orders issued the Central Govt. there is also as order issued by MHA that the landlords shall not demand rent or force the tenants to be evicted from the place in the lock down situation. The central Govt. has invoked the provisions of Disaster Management Act to control the situation and in view of the same govt. has also issued an orders to the landlords as to not to demand rent. If your landlord is demanding you rent for the lockdown period and is either threatening you or trying to evict you, then it is illegal and he will have to face the legal consequences for these actions as per the orders passed by the MHA. Thus your landlord cannot force you or evict you for the nonpayment of rent during this lockdown period.