Does an arbitration agreement protect a
debtor from the threat of liquidation?
27 July 2020
UPDATED 3 AUGUST 2020
Updates marked with *
Updated: Ireland, Israel
We take a look at some of the recent emergency legislation and measures implemented by various nations around the world in response to COVID-19. As this is a rapidly developing crisis, please ensure you keep a close eye on the Lexology Coronavirus hub page for the most up-to-date information.
In several Commonwealth jurisdictions, the corporate legislation allows creditors to petition a court to order the winding up of a debtor in circumstances where that debtor is unable to pay its debts as they fall due. Such legislation generally presumes that the debtor is insolvent if it has failed to comply with a statutory notice requiring the debtor to pay a certain debt within a given period of time (a statutory demand).
In an interesting case of intersection of insolvency and copyright laws, the Delhi High Court has held that the suit for alleged infringement of copyrights, arising out of and/or is in relation to the insolvency resolution plan of a corporate debtor must be adjudicated by the NCLT and that the proceedings in the Civil Court are barred. The suit was dismissed as not maintainable before the High Court in view of Sections 230 and 231 read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016.
As per Section 60 (5) (c) of the Insolvency and Bankruptcy Code (IBC), the jurisdiction of matters, inter alia, pertaining to Intellectual Property infringement by a corporate debtor is vested with the National Company Law Tribunal (NCLT) which is empowered by the IBC to entertain and dispose off any question of priorities or any question of law or fact, arising out of or concerning the insolvency resolution for liquidation proceedings.
On 5 June 2020, the Government of India issued an ordinance (The Insolvency and Bankruptcy Amendment (Ordinance), 2020 (the Ordinance)) to amend the Insolvency and Bankruptcy Code, 2016 (the Insolvency Code). This follows on from the Finance Minister’s press conferen
Observing that the short-term loans advanced by few Appellants on exorbitant rates of interest (40% to 60% per annum) were covered under Extortionate Credit Transactions as prohibited under Section 50(1) of the Insolvency and Bankruptcy Code, 2016, the NCLAT has set aside the entire transactions as illegal and void and held them as not entitled to any relief.
The Government of India has introduced a slew of legislative, regulatory and financial measures to support the MSME sector amidst the financial crisis created by the COVID-19 pandemic.
Background
The Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act) provides a raft of protections and incentives for micro, small and medium enterprises (MSMEs).
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020
On 5th June, 2020, the Insolvency and Bankruptcy Code (Amendment) Ordinance was promulgated to amend the provisions of the Insolvency and Bankruptcy Code (“Code”). The rationale for the said amendment is to prevent corporate persons experiencing financial distress on account of the unprecedented Covid-19 situation from being pushed into insolvency proceedings.
New Section 10A
In a significant judgment dated 9 June 2020 titled ‘Indus Biotech Private Limited v.