New Delhi,  The government has finely attuned the Insolvency and Bankruptcy Code (IBC) to meet challenges posed by the Covid-19 crisis, insolvency panel chief M.S. Sahoo said on Friday.

"What was required was to have a well-calibrated middle path and suspend some of the elements," he said at the e-summit on IBC hosted by industry body Assocham.

The Insolvency and Bankruptcy Board of India Chairman noted that traditional models will not work at this point of time, when the pandemic has caused stress to firms, industries and the economy.

"This called for experimentation that when these twin complementary remedies translated to two competing options i.e. either suspend the operations of the code or let it continue to operate," Sahoo was quoted as saying in a statement.

"If you suspend the operations of the code, you will fail to liquidate an unviable firm, this mistake can be rectified in the following quarter or year but the second option that you operate the IBC in its normal form, this mistake can never be rectified. So rescuing a viable firm is far more important than failing to liquidate an unviable firm during the current times. Both the options have intended and unintended consequences."

Besides, Sahoo said that companies experiencing stress for the first time and that to on account of Covid will be prevented from being forced into insolvency proceedings because of the unprecedented force majeure situation.

"There is a possibility that a company, which never defaulted earlier, defaulted during Covid on account of some fundamental reason and not because of the pandemic... there could be such a rare case but if we get into such things as to which one defaulted on account of Covid and which one for some other reason, then we will simply lose years fighting legal battles, so let such rare case have the benefit but avoid disputes and move on," the IBBI chief said.

On suspension of Section 10 of the IBC, he said it is a voluntary option.

He further said that the ordinance brought in Section 10A that prohibited filing of applications only for the purpose of CRP, and that it did not change the definition of default, did not dissolve the obligations of the debtors, and no other law was touched.

Post the ordinance, CRP cannot be initiated for a default arising on or after March 25 for a period of six months or such further period not exceeding one year from such date.