1 Lakh was increased to Rs. Increase in threshold limit to INR 1 Crore The significant relief that has been implemented straightaway by the Central Government is that the threshold limit under IBC (Insolvency and Bankruptcy Code) of default under Section 4 of the Insolvency and Bankruptcy Code, 2016 to Rs. The step has been widely touted as a relief for MSMEs in this time of crisis, however, this might have multiple implications. [F. No. 30/09/2020 dated 24 th March 2020 issued by the Ministry of Corporate Affairs (‘MCA’) has created much confusion amongst businesses. 30/9/2020-Insolvency] GYANESHWAR KUMAR SINGH , Jt. The Government of India vide Notification S.O. Key Relaxations given under the IBC Minimum default threshold has been increased for excluding filling application . Recently, the threshold of default for triggering the insolvency proceedings against a corporate debtor under the Insolvency & Bankruptcy Code, 2016 (“IBC”) was increased by a Notification issued by the Central Government on 24.03.2020 (“Notification”). 1205(E) dated 24.03.2020, thus altering the minimum amount of default as under Corporate Insolvency Resolution Process (‘CIRP’). What Led to Increase in Min. Mar 24 2020, 6:00 PM Mar 24 2020, 6:15 PM March 24 2020, 6:00 PM March 24 2020, 6:15 PM. Secy. 1 Crore, from the earlier amount of Rs. NOTIFICATION New Delhi, the 24th March, 2020 S.O. 1205(E).² In exercise of the powers conferred by the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby specifies one crore rupees as the minimum amount of default for the purposes of the said section. As a part of the Government’s continuing efforts to combat the economic nosedive, the minimum threshold for initiating insolvency was increased from one lakh rupees to one crore rupees by means of a notification issued by the Ministry of Corporate Affairs dated March 24, 2020 in the exercise of powers conferred under the proviso to Section 4(1) of the IBC (“Notification”). 1 Crore in order to prevent triggering of Insolvency proceedings against small and medium enterprises. Note that Rs. It is the first time when the government has exercised this power and has increased the limit to its maximum. By its immediate operation the notification ousts the Tribunal from is jurisdiction of dealing with the case of corporate debtors where the amount of default is less than one crore rupees.. Sec 4(1) talks of entire Part II of IBC and not just sections 7,9 or 10. The amendment allows the Centre to notify the minimum amount of default value, not more than Rs 1 crore, for pre-packaged insolvency resolution process. Section 4 of the Code lays down that the minimum amount of the default by a corporate debtor is one lakh rupees. In lieu of the lockdown imposed due to COVID-19, the threshold to file insolvency proceedings was raised to 1 crore rupees vide MCA Notification No. Thus, the said revision in the threshold of the amount of default under IBC that has been given effect to by a notification dated 24.03.2020 shall only be prospective and not retrospective. S.O. 1 Crore is the maximum threshold which the Central Government can prescribe under section 4. 1 lakh), for triggering the Corporate Resolution Insolvency Process (CIRP). 1 Lakh. Talking to reporters, Finance and Corporate Affairs Minister Nirmala Sitharaman said the government may … S.O. Further, it is not actually very beneficial to MSMEs, since MSMEs will not be entitled to practically initiate any action until the threshold (now increased to Rs. ** The minimum default threshold has been increased from Rs. 1205(E) dated 24 th March 2020, has amended section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016. Pursuant to Government’s notification, the threshold to initiate Corporate Insolvency Resolution Process (“CIRP”) has been raised to Rs. 1 Lakh to Rs. Status as on- 16/06/2020. On 24 th March, 2020 the Ministry of Corporate Affairs Nirmala Sitharaman increased the threshold under Insolvency and Bankruptcy Code (“Code”) from the erstwhile Rs. 1 Lakh to Rs. 1 Crore, from the earlier amount of Rs. Notification of 24 th March 2020 of the threshold increase only applies to new IBC proceedings but no new IBC proceedings can be initiated after 25 th March 2020 as per Insolvency and Bankruptcy Amendment Act, 2020. 1 Crore. 1 Lakh, in order to trigger Corporate Insolvency Resolution Process (“#CIRP“) under the Insolvency and Bankruptcy Code, 2016 (“#IBC“). 1 Lakh. Section 4 of the Insolvency and Bankruptcy Code, 2016 (IBC) deals with the threshold amount for insolvency initiation, which was 1 lakh with central government having power to increase the limit upto anything not more than 1 crore. Overview : MINISTRY OF CORPORATE AFFAIRS (MCA) vide notification No. The erstwhile limit of Rs. Threshold for invoking IBC. Bookmark. Though the notification dated 24 March, 2020 was intended to benefit the MSMEs, the notification is not line with such intention. New Delhi: The government on Tuesday raised the threshold for invoking insolvency under the IBC to Rs 1 crore from the current Rs 1 lakh with a view to prevent triggering of such proceedings against small and medium enterprises that are facing currently the heat of coronavirus pandemic. Payaswini Upadhyay @ PayaswiniLLB. 1 crore (from the existing threshold of Rs. 1 crore) which is very unlikely to cross. Threshold Limit Increased from Rupees 1 Lakh to 1 Crore Under IBC On March 24, 2020, the Minister of Finance and Corporate Affairs, Smt. 1 crore. 1 Lakh to Rs. Increasing the threshold for default from INR 1 Lakh to INR 1 Cr, FM Sitharaman stated that Sec 7,9, 10 of IBC could also be suspended. MCA Amends Section 4 of Insolvency and Bankruptcy Code, 2016 – Threshold of default under Section 4, IBC for initiation of insolvency proceedings raised to Rs 1 crore . IBC: Increase In Threshold To Trigger Insolvency May Not Be A Temporary Measure, Experts Say . If the notification increasing the default threshold to Rs.1 Crore is taken to have retrospective effect, the accrued right of a creditor, in whose case a default has already occurred prior to 24.03.2020, to sue will be jeopardized. Increase in threshold under IBC. The Government has taken several measures to mitigate the distress caused by the pandemic, including increasing the minimum amount of default for initiation of corporate insolvency resolution process to Rs 1 crore rupees, and suspending filing of applications for initiation of corporate insolvency resolution process in respect of defaults arising for one year beginning March 25th, 2020. Pursuant to Government's notification, the threshold to initiate Corporate Insolvency Resolution Process ("CIRP") has been raised to Rs. The amendment of the minimum threshold of default from 1 (One Lakh) to 1 (One Crore) rupees under Section 4(1) of the Insolvency and Bankruptcy Code, 2016 ('IBC' or ‘2016 Code’) made by the Government of India vide Notification F. No. It is this lower threshold that has made it easier for creditors to use the Code as an alternate recovery mechanism. 1205 (E) dated 24.03.2020 (“Notification“) raised the minimum #threshold of #default amount to Rs. Therefore, the concerned notification only applies to: (a) default occurred on 24 th March, (b) default occurred before 24 th March but the application for CIRP will be … On 24 th March 2020, the Ministry of Corporate Affairs vide a notification, increased the threshold limit for minimum default for which an insolvency petition could be filed, to INR 1 crore from the earlier set limit of INR 1 lakh in exercise of the power granted to it by the proviso to Sec 4 of the Insolvency and Bankruptcy Code, 2016. 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