The National Company Law Appellate Tribunal (NCLAT) has ruled that the revised default threshold of ₹1 crore to trigger corporate insolvency will apply prospectively from March 24 and not retrospectively. This means that the applications received before March 24, who had a debt default of less than ₹1 crore, but over ₹1 lakh can be admitted for corporate insolvency process.

The NCLAT also ruled that the revised default limit would not apply to those applications under the insolvency and bankruptcy code (IBC), that were pending for admission on March 24 when the minimum default limit was raised to ₹1 crore from ₹1 lakh. The MCA on March 24 notified that the enhanced minimum amount of default limit of ₹ 1 crore for initiating the corporate insolvency resolution process (CIRP). This move was seen to provide relief to small and medium businesses because it prevented the start of insolvency proceedings against MSMEs amidst the COVID-19 pandemic.

The government had also suspended the initiation of insolvency proceedings (under provisions of Sections 7, 9, and 10 of IBC) against the corporate debtor for defaults arising post-March 25 when the lockdown was announced. This suspension will be in force till December 25.