Rajya Sabha passes The Insolvency and Bankruptcy Code

The Rajya Sabha on Monday approved amending the three-year-old Insolvency and Bankruptcy Code (IBC), providing clarity about preference to secured lenders over operational creditors and giving lenders explicit authority over distribution of proceeds of auction of loan defaulting companies.

Replying to a debate on the Insolvency and Bankruptcy Code (Amendment) Bill 2019, Finance Minister Nirmala Sitharaman said the changes being brought in now are in response to events that eroded legislative intent of the IBC.

She referred to the Essar Steel insolvency case where the lenders and operational creditors have been treated at par by the bankruptcy court for distribution of auction proceeds.

The amendments give committee of creditors of a loan defaulting company explicit authority over the distribution of proceeds in the resolution process and fixes a firm timeline of 330 days for resolving cases referred to the IBC.

These are in response to "newer challenges coming up," she said adding the government speedily came up with the amendments in response to the situation developing.

The National Company Law Appellate Tribunal (NCLAT) had recently ruled in the Essar Steel Ltd's case that the Committee of Creditors (CoC) had no role in distribution of claims and brought lenders (financial creditors) and vendors (operational creditors) on a par.

The government is amending IBC as "very serious interpretative problems were coming," she said referring to the Essar Steel insolvency case. #casansaar (Source - PTI, MoneyControl, The Hindu)