Vol 18 (2021) - Issue 6

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Blanket Protection under India's COVID-19 Insolvency Ordinance: An Attempt to Restore 'Defaulter's Paradise’?

Synopsis
The COVID-induced amendments to the Indian Insolvency Code (the Code) were introduced in light of the nationwide lockdown crippling the financial capacity of companies. The Executive deemed it fit to provide blanket protection to all companies from insolvency proceedings being initiated against them by creditors, irrespective of whether the default giving rise to a potential insolvency process was 'COVID-induced' or not.. In doing so,the net of protection has been flung far wider than the goal to be achieved. A more prudent route would have been to exclude only those defaults from the Code having proximate nexus with COVID-19, thereby only protecting (otherwise) healthy companies from undergoing an insolvency process; a lesson that India needs to learn from other jurisdictions.