–Megha Mittal & Shreya Jain
Frivolous initiation of insolvency process, merely for recovery of dues has been a persistent concern- catalyst being the seemingly low threshold of Rs.1,00,000/-.While murmurs about raising the threshold limit for initiating insolvency process have long been in the picture, the notification comes in the wake of recent outbreak of the novel COVID – 19 – the minimum default requirement now stands increased hundred times; from Rs. 1,00,000/- to Rs. 1,00,00,000.
Applicable from 24.03.2020, the Government, in exercise of its powers under section 4 of the Insolvency and Bankruptcy Code, 2016 (“Code”) has specified Rs. 1,00,00,000 (Rupees One Crore) as the minimum amount of default for the purposes of triggering insolvency. Note that Rs. 1 Crore is the maximum threshold which the Central Government can prescribe under section 4.
The step has been widely touted as a relief for MSMEs in this time of crisis, however, this might have multiple implications. The authors have made a humble attempt to analyse its implications from a broader perspective, and if at such increase would be welcomed in absence of the ongoing crisis.