Amidst the outbreak of novel coronavirus (“COVID-19”) and its consequential countrywide lockdown, shutting down majority of the commercial, industrial and retail activities, the much forgotten ‘Force Majeure’ clause in contracts and leases is now receiving close scrutiny. In simple terms, ‘Force Majeure’ events relieve a party from performance of its contractual obligations, without any consequential breach of the contract, provided such performance is adversely impacted by events outside the control of an affected party such as act of God, natural disaster, war, strike, lockout, epidemic, Government orders, etc.
In furtherance of its previous corporate governance reliefs, the Ministry of Corporate Affairs (“MCA”) has introduced the Companies Fresh Start Scheme, 2020 (“CFS Scheme”) and amended the LLP Settlement Scheme, 2020 vide its circular dated March 30, 2020 (“LLP Modified Scheme”) to allow defaulting companies and limited liability partnerships (“LLPs”) an opportunity to file belated documents, returns etc. without charging of additional fees with respect to the delay in filing and grant immunity from prosecution with respect to such delay.
The Ministry of Corporate Affairs (“MCA”) vide its circular dated 30th March 2020 has issued “Companies Fresh Start Scheme, 2020” (“CFSS 2020”) and revised the “LLP Settlement Scheme, 2020” (“LLP Scheme 2020”) to promote defaulting companies/LLPs to make a fresh start on a clean slate and waive the additional fees for delayed filings by the companies/LLPs with the Registrar of Companies (“ROC”) during the currency of the Schemes i.e. from 1st April 2020 to 30th September 2020. Both the schemes incentivize compliance and reduce compliance burden during the unprecedented public health situation caused by the outbreak of COVID-19.
In a move aimed at smooth resolution of insolvent firms, the Insolvency and Bankruptcy Board of India (“IBBI”) amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) on March 29, 2020.
Due to the declaration of 21 days lockdown by the Government of India with effect from 25th March, 2020 as a measure to contain the spread of Covid-19, it has become extremely hard for the insolvency professionals to continue to conduct the process, for members of committee of creditors to attend the meetings, and for prospective resolution applicants to prepare and submit resolution plans, during the period of nationwide lockdown.
The Reserve Bank of India (“RBI”) Governor Shri. Shaktikanta Das, during the press conference today, announced various measures to increase liquidity and ease banking regulations during the challenging times and to safeguard country’s economy from the impact of Covid-19 pandemic related lockdowns.
The key highlights of the announcements made are as follows:
- The Monetary Policy Committee reduced the repo rate by 75 basis points and reverse repo rate by 90 basis points.
- The RBI will conduct auctions of Targeted longer-term refinancing operations of up to three-year tenor of appropriate sizes for a total amount up to Rs. 1 lakh crore at a floating rate, linked to policy repo rate.
- The cash reserve ratio of all banks to be reduced by 100 basis points to 3 percent beginning March 28th, 2020 for a year. This cut down will release liquidity of Rs. 1,37,000 crores across the banking system.
- The Marginal Standing Facility (MSR) raised from 2 percent of Statutory Liquidity Ratio (SLR) to 3 percent with immediate effect and shall be applicable up to June 30th, 2020.
- The RBI Governor declared that the above liquidity measures will inject liquidity of Rs 3.74 lakh crores to the Indian economic system.
- All lending institutions and banks are being permitted to allow a moratorium of three months on repayment of installments for term loans outstanding as on March 1st, 2020.
- The lending institutions also permitted to allow deferment of three months on payment of interest w.r.t all such working capital facilities outstanding as of March 1st, 2020.
- The RBI Governor stated that moratorium on term loans and deferment of interest payment will not result in asset classification downgrade.
- Further deferring implementation of last tranche of 0.625 percent of capital conservation buffer to September 30th, 2020.
- The banks in India that operate IFSC banking units allowed to participate in offshore INR NDF market w.e.f. June 1st, 2020.
In a significant move, the Ministry of Health and Family Welfare (“MoHFW”) on March 25, 2020 has issued the Telemedicine Practice Guidelines (“Guidelines”) for enabling Registered Medical Practitioners (“RMPs”) to provide healthcare using telemedicine. As per the Guidelines, ‘telemedicine’ is the delivery of health care services, where distance is a critical factor, by all the healthcare professionals using information and communication technologies for the exchange of valid information for diagnosis, treatment and prevention of disease and injuries, research and evaluation, all in the interests of advancing the health of individuals and their communities.
The Union Finance & Corporate Affairs Minister, Government of India, Ms. Niramla Sitharaman, in her interactions with the press yesterday, i.e., on March 24, 2020, has announced multiple relaxations to statutory and regulatory compliances under various legislations viz., the Companies Act, 2013 (“CA2013”), Limited Liability Partnership Act, 2008 (“LLP Act”), Insolvency and Bankruptcy Code, 2016 (“IBC”), Income Tax Act, 1961, the Goods and Services Tax legislations, Customs Act, 1962 etc. The complete press release vis-à-vis all measures announced can be accessed at http://pib.nic.in/newsite/PrintRelease.aspx?relid=200639.
In the midst of the shutdown of businesses all over India to contain the spread of the highly contagious Covid-19 infection, Finance Minister Smt. Nirmala Sitharaman today addressed a press conference on various statutory and regulatory compliance issues and announced a slew of measures for providing relief amid the pandemic outbreak.
The brief highlights of the announcements made by the Finance Minister: