LS passes Insolvency and Bankruptcy Code amendment Bill

The Lok Sabha on Tuesday passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018 that recognises homebuyers as financial creditors to real estate developers. The bill also proposes a special dispensation for small sector enterprises. 

The IBC Amendment Bill now requires clearance from Rajya Sabba to replace the June 6 ordinance that sought to put these amendments into force to aid quick resolution of several bankrupt firms. 

Moving the bill in Lok Sabha, interim finance minister Piyush Goyal said, “We want to address concerns expressed by the MSME sector and homebuyers. We have learnt from two years of implementation of IBC, and through the amendments, we want to strengthen IBC Bill.” 

The minister also said that the objective of the bill was not to liquidate the companies but to save jobs in those companies. 

“After years of lethargy in recovering bank loans, finally we now have a new law — the Insolvency and Bankruptcy Code 2016, which has started bringing big bank defaulters to the book and made banks recover loans from them,” the minister tweeted. 

Goyal also rejected Opposition’s charge that the government has come out with an ordinance to amend the code to favour a big corporate house. 

The bill says that homebuyers will get due representation in the committee of creditors (CoC) that takes a call on resolution proposals, making them an integral part of the decisionmaking process. 

It also provides some reliefs for micro, small and medium enterprises (MSMEs). It does not disqualify promoter of an MSME firm from bidding for his enterprise undergoing corporate insolvency resolution process (CIRP), provided he is not a wilful defaulter and does not attract other disqualifications not related to default. 

According to the bill, lenders will need to seek the prior approval of the competition regulator before finalising resolution plans. The measure seeks to prevent litigation that can derail the resolution process at a later stage. Currently, the winning bidder approaches Competition Commission of India (CCI) for clearance before formally taking over the asset.

The amended code allows withdrawal of a resolution application with the approval of 90% members of the CoC. However, such withdrawal will only be permissible before publication of notice inviting expressions of interest (EoI). This means there can be no withdrawal once the commercial process of EoIs and bids starts. #casansaar (Source - PTI, Economic Times)