On January 17, 2020, the Ministry of Health and Family Welfare acknowledged the emergence of COVID-19 pandemic that was spreading across China. Tamil Nadu reported its first confirmed case of COVID-19 on March 7, 2020. As of April 28, the state has 1,937 confirmed cases of COVID-19 (seventh highest in the country). Of these, 1,101 have recovered (third highest rate of recovery in the country among states with 100 or more cases) and 24 have died. The state government has taken several actions to contain the spread and impact of COVID-19. In this blog, we look at the key measures taken by the Tamil Nadu government between January 19 and April 28, 2020.
Initial phase
The Tamil Nadu government came out with a series of responses between January 19 and February 1. These included: (i) readying Rapid Response Teams (RRTs) at state and district levels, (ii) setting up of a 24/7 control room, (iii) thermal scanning of air travellers from China, (iv) creating isolation wards in the General Hospitals of four major cities, and (v) running appropriate awareness campaigns.
Some of the other early measures are summarised below:
Health measures
On March 13, the Governor declared COVID-19 to be a notified disease in the state of Tamil Nadu, under the Tamil Nadu Public Health Act, 1939. Notifying a disease allows for incidences of the disease to be mandatorily reported to the government and in turn, helps authorities to respond with appropriate measures to prevent the spread of the disease.
On March 15, the government prescribed the Tamil Nadu COVID-19 Regulations, 2020. These regulations detail the responsibilities of hospitals and individuals, and the powers of officials in relation to the diagnosis, treatment, and containment of COVID-19. These include (i) creation of isolation wards in hospitals, (ii) containment measures in an area once positive cases are detected, and (iii) mandatory 14-day home isolation for asymptomatic air travellers from COVID-19 affected countries.
On March 15, the government also mandated a 14-day institutional isolation for all air travellers to prevent import of infections from other states. The state also initiated setting up of testing camps and conducting disinfectation drives in the border districts.
Travel and Movement
On March 15, the government notified a series of instructions that restricted the movement of people in the state. These include (i) shutting down of establishments, such as, educational institutions (up to Class 5), theatres, malls etc, and (ii) banning of inter-state travel for 15 days.
On March 16, the government announced additional restrictions till Mar 31, such as, closure of: (i) anganwadis and making alternate provision of dry ration for children at their homes, (ii) swimming pools, amusement parks, gyms, zoos, museums, bars, clubs etc, and (iii) all educational institutions, except the conduct of practical exams for class 10 and 12, and various entrance exams.
State borders were sealed off for road traffic, except for movement of essential commodities, from March 20 to March 31. Public transportation services, such as metro rail and inter-state private buses, were also suspended till March 31.
The Prime Minister asked the country to observe a Janta Curfew from 7 am to 9 pm on March 22,. The state government further extended this curfew to 5 am on March 23. Following this, the government immediately announced a state-wide lockdown from March 24 up to April 1.
On April 5, the government issued an advisory for the quarantine of migrant workers and the conduct of health camps for them.
Welfare Measures
On March 15, the government announced financial assistance of a total of Rs 60 crore to various departments, such as, health, transport etc, to take precautionary measures to combat COVID-19.
On March 24, the government announced the distribution of cash support of Rs 1,000 to all entitled family cardholders. Further, they were also eligible for free supply of essential commodities such as rice, dal, sugar, etc, during the month of April, through the Public Distribution System (PDS).
During the lockdown
A state-wide lockdown was announced from March 24 to April 1, followed by a nation-wide lockdown between March 25 and April 14. On April 13, the state-wide lockdown was extended up to April 30. This was followed by the extension of the nation-wide lockdown from April 15 to May 3. Under this, certain activities could be resumed after April 20.
Some of the key measures undertaken during the lockdown period are:
Travel and movement
Amidst the lockdown, on March 25, the government notified that establishments providing essential goods and services, which were allowed to operate. These included establishments such as (i) police forces, (ii) treasury, (iii) public utilities, (iv) banks, (v) media, (vi) telecommunications, and (vii) shops dealing with food, groceries etc. Further, on March 28, the government permitted a few agriculture-related establishments to operate, such as, Mandis, fertiliser shops, and agencies involved in procurement of agriculture products.
An Expert Committee formed by the state government to formulate guidelines for phased exit from lockdown after April 20, recommended the extension of the lockdown till May 3. Certain select activities were, however, permitted to resume operations from April 20 onwards. These include (i) MNREGA works related to irrigation and water conservation, (ii) rural construction projects on irrigation, dam safety, hospital buildings, roads and bridges, and (iii) state and central government offices at one-third capacity.
In view of rising number of cases, on April 24, stringent curfew orders were passed in the districts of (i) Chengalpattu, (ii) Kancheepuram, and (iii) Thiruvallur. The curfew will be imposed between April 26 and April 29, from 6 am to 9 pm, and with more stringent restrictions than under the ongoing nation-wide lockdown, such as, (i) petrol bunks to operate only between 8 am and 12 noon, and (ii) supermarkets and shops to remain shut.
Curfew orders were passed in 5 more districts. In Chennai, Coimbatore and Madurai, curfew is imposed between 6 am and 9 pm from April 26 to April 29. In Salem and Tiruppur, curfew was imposed from April 26 to April 28.
Welfare Measures
On March 30, the government announced a cash assistance of Rs 1,500 per month to be credited into the bank accounts of differently-abled persons. It also announced that transgenders without ration cards, were eligible to receive 12kg of rice, 1kg of dal, and 1 litre of cooking oil, from fair price shops (FPS).
Further, a cash assistance of Rs 1,000 was announced for (i) all ration card holders through FPS, (ii) registered auto drivers and construction workers, (iii) members of TN Cine Welfare Board, and (iv) match factory workers.
On April 2, the government announced a concession package to manufacturers of COVID-19 related medical equipment, who will commence production before July 31, 2020. The package applied to both MSMEs and large manufacturers of equipment, such as, ventilators, Personal Protection Equipment (PPE) kits and medicines. Some of the concessions include: (i) 30% capital subsidy, upto Rs 20 crore, (ii) 100% stamp duty waiver, (iii) 6% interest subvention for capital loans for two quarters, (iv) commencement of manufacturing without prior approval, and (v) provision of necessary land on priority basis for short-term/long-term leases, etc.
Rs 50 lakh grant was announced to the families of frontline workers in the event of their unfortunate demise. If infected by COVID-19, they are eligible for Rs 2 lakh assistance towards treatment costs. In certain cases, if eligible, their kin would also receive a government job offer.
On April 7, the government announced that MLALAD funds could be utilised for COVID-19 prevention and containment activities. A total of Rs 1.25 crore can be utilised towards prevention, containment, treatment, and purchase of medical equipment, PPEs etc.
Health Measures
On April 2, the government released a list of designated COVID-19 hospitals in the state. Instructions were issued to refer all COVID-19 positive cases exclusively to these designated hospitals. However, willing citizens were also permitted to approach private hospitals, at their own cost. Private hospitals were further instructed to establish dedicated fever clinics to cope with the increasing load of flu and fever cases.
Amidst a rise in the number of cases, on April 4, the government issued instructions to: (i) avoid all kinds of religious gatherings, (ii) hospitals to not show religious bias in treating patients, and (iii) doctors to coordinate with the government and check in on the mental health of quarantined patients via video conferencing facilities such as Skype.
On April 5, the government issued cluster containment measures to stop the transmission, morbidity, and mortality associated with the further spread of COVID-19. This was in response to the large number of imported infections from the attendees of the Nizamuddin conference in Delhi.
Various guidelines were issued towards (i) treatment protocol of COVID-19 positive patients, (ii) appropriate management of suspect cases of COVID-19, (iii) dead body management, (iv) criteria for classification of hotspots, and (v) protocol for use of Rapid Antibody Tests in hotspot areas.
Resource Management: On March 27, the Chief Minister announced an additional COVID-19 related recruitment of doctors and lab technicians. The recruited members were to join within three days of the notification. On April 25, an additional 1,323 nurses were also recruited.
A two-month extension was announced to the tenures of medical professionals retiring on March 31 and April 30.
The government also instructed District Authorities to ensure the protection of doctors and other hospital staff who are being forcefully evicted from their houses by landlords. As a measure to develop immunity against COVID-19, the government, on April 25, also recommended providing Zinc and Vitamin tablets, and herbal powder to all personnel on frontline duty in containment areas.
Other Measures
Administrative: Eleven committees have been formed to coordinate implementation of various welfare programmes. In all districts, Crisis Management Committees have been formed under the district collector.
Education: The conduct of semester examinations in universities and colleges is postponed to the beginning of the next academic year, as and when the institutions reopen. Private colleges and schools were also instructed to not compel students/parents to pay pending dues for 2019-20 or advance fees for 2020-21.
Industry: On April 22, the government released a list of industries classified as continuous process industries. These are companies where the production lines are functioning 24/7. The list includes (i) refineries, (ii) large steel plants, (iii) large cement plants, (iv) sugar mills, (v) large paper mills, (vi) tyre manufacturers etc.
Technology: The government launched a Whatsapp Chat Bot for providing latest information and guidance related to COVID-19 in both Tamil & English.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
The Insolvency and Bankruptcy Code, 2016 was enacted to provide a time-bound process to resolve insolvency among companies and individuals. Insolvency is a situation where an individual or company is unable to repay their outstanding debt. Last month, the government promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 amending certain provisions of the Code. The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018, which replaces this Ordinance, was introduced in Lok Sabha last week and is scheduled to be passed in the ongoing monsoon session of Parliament. In light of this, we discuss some of the changes being proposed under the Bill and possible implications of such changes.
What was the need for amending the Code?
In November 2017, the Insolvency Law Committee was set up to review the Code, identify issues in its implementation, and suggest changes. The Committee submitted its report in March 2018. It made several recommendations, such as treating allottees under a real estate project as financial creditors, exempting micro, small and medium enterprises from certain provisions of the Code, reducing voting thresholds of the committee of creditors, among others. Subsequently, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, was promulgated on June 6, 2018, incorporating these recommendations.
What amendments have been proposed regarding real estate allottees?
The Code defines a financial creditor as anyone who has extended any kind of loan or financial credit to the debtor. The Bill clarifies that an allottee under a real estate project (a buyer of an under-construction residential or commercial property) will be considered as a financial creditor. These allottees will be represented on the committee of creditors by an authorised representative who will vote on their behalf.
This committee is responsible for taking key decisions related to the resolution process, such as appointing the resolution professional, and approving the resolution plan to be submitted to the National Company Law Tribunal (NCLT). It also implies that real estate allottees can initiate a corporate insolvency resolution process against the debtor.
Can the amount raised by real estate allottees be considered as financial debt?
The Insolvency Law Committee (2017) had noted that the amount paid by allottees under a real estate project is a means of raising finance for the project, and hence would classify as financial debt. It had also noted that, in certain cases, allottees provide more money towards a real estate project than banks. The Bill provides that the amount raised from allottees during the sale of a real estate project would have the commercial effect of a borrowing, and therefore be considered as a financial debt for the real estate company (or the debtor).
However, it may be argued that the money raised from allottees under a real estate project is an advance payment for a future asset (or the property allotted to them). It is not an explicit loan given to the developer against receipt of interest, or similar consideration for the time value of money, and therefore may not qualify as financial debt.
Do the amendments affect the priority of real estate allottees in the waterfall under liquidation?
During the corporate insolvency resolution process, a committee of creditors (comprising of all financial creditors) may choose to: (i) resolve the debtor company, or (ii) liquidate (sell) the debtor’s assets to repay loans. If no decision is made by the committee within the prescribed time period, the debtor’s assets are liquidated to repay the debt. In case of liquidation, secured creditors are paid first after payment of the resolution fees and other resolution costs. Secured creditors are those whose loans are backed by collateral (security). This is followed by payment of employee wages, and then payment to all the unsecured creditors.
While the Bill classifies allottees as financial creditors, it does not specify whether they would be treated as secured or unsecured creditors. Therefore, their position in the order of priority is not clear.
What amendments have been proposed regarding Micro, Small, and Medium Enterprises (MSMEs)?
Earlier this year, the Code was amended to prohibit certain persons from submitting a resolution plan. These include: (i) wilful defaulters, (ii) promoters or management of the company if it has an outstanding non-performing asset (NPA) for over a year, and (iii) disqualified directors, among others. Further, it barred the sale of property of a defaulter to such persons during liquidation. One of the concerns raised was that in case of some MSMEs, the promoter may be the only person submitting a plan to revive the company. In such cases, the defaulting firm will go into liquidation even if there could have been a viable resolution plan.
The Bill amends the criteria which prohibits certain persons from submitting a resolution plan. For example, the Code prohibits a person from being a resolution applicant if his account has been identified as a NPA for more than a year. The Bill provides that this criterion will not apply if such an applicant is a financial entity, and is not a related party to the debtor (with certain exceptions). Further, if the NPA was acquired under a resolution plan under this Code, then this criterion will not apply for a period of three years (instead of one). Secondly, the Code also bars a guarantor of a defaulter from being an applicant. The Bill specifies that such a bar will apply if such guarantee has been invoked by the creditor and remains unpaid.
In addition to amending these criteria, the Bill also states that the ineligibility criteria for resolution applicants regarding NPAs and guarantors will not be applicable to persons applying for resolution of MSMEs. The central government may, in public interest, modify or remove other provisions of the Code while applying them to MSMEs.
What are some of the other key changes being proposed?
The Bill also makes certain changes to the procedures under the Code. Under the Code, all decisions of the committee of creditors have to be taken by a 75% majority of the financial creditors. The Bill lowers this threshold to 51%. For certain key decisions, such as appointment of a resolution professional, approving the resolution plan, and making structural changes to the company, the voting threshold has been reduced from 75% to 66%.
The Bill also provides for withdrawal of a resolution application, after the resolution process has been initiated with the NCLT. Such withdrawal will have to be approved by a 90% vote of the committee of creditors.
