Bill for timely insolvency resolution passed in Lok Sabha

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Amid high-profile insolvency cases like Essar Steel and Jet Airways being heard by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), a Bill that seeks time-bound resolution of such cases was on Thursday passed in the Lok Sabha with voice vote.

Moving the IBC (Amendment) Bill, 2019, for passage, Finance Minister Nirmala Sitharaman said that the amendments are aimed at ensuring greater timeliness for resolution process which has to be completed in 330 days, and changes are to made in seven sections of the law.

The Rajya Sabha had, on Monday, cleared the Bill providing greater clarity to the Bankruptcy Code and timely resolution of such cases.

The Bill proposes amendments to the Insolvency and Bankruptcy Code, 2016, that provides the legal framework for the resolution process in cases of insolvency whereby individuals or companies are unable to repay their outstanding debts.

The proposed changes in the bankruptcy law are aimed at completing the corporate insolvency resolution process (CIRP) within an overall time limit of 330 days, including litigation and other judicial processes, maximizing value for the corporate debtor and plugging various loopholes.

Currently, the resolution plan for a bankrupt company has to be cleared within 270 days.

The Bill has also proposed that if an application under the bankruptcy law is not admitted or rejected within 14 days by the adjudicating authority, it shall provide the reasons in writing.

Following its clearance by Parliament, the Bill will go for the President's assent so as to become law.

Once the amendments become law, greater clarity is expected on allowing comprehensive corporate restructuring schemes such as mergers, demergers and amalgamations as part of the resolution plan.

The Finance Minister said the government is amending Sections 5, 6, 7, 12, 25 (A), 30, 31 and 33 of the Insolvency and Bankruptcy Code.

"The main purpose of the Bill is to further the object of the court which is to ensure insolvency resolution of corporate debtor in a time-bound manner and for the maximization of the value of assets of such status," she said.

The amendments to the IBC aim to ensure timely admission and completion of cases, said Sitharaman, adding that the government wants to ensure the order of priority of the creditors as laid down by Section 53 is maintained, and to resolve deadlock-like situation.

"This Bill strengthens the hands of the homebuyers also," she said. 

Several Opposition members raised their objections to the Bill.

DMK's Kanimozhi said private creditors would never put the state above their private interests. "Because of malpractice by corporate companies, smaller entities would be affected. Economically it would have a ripple effect," she said. 

The Trinamool Congress' Kalyan Banerjee said the Supreme Court had directed that a circuit board of the National Company Law Appellate Tribunal (NCLAT) be created, which has not happened and requested the Finance Minister to set it up as soon as possible.

Magunta Sreenivasulu Reddy of YSR Congress noted that ease of doing business is turning into difficulty of doing business.

Pointing out that time required for resolution of any issue related to insolvency took about 4.3 years, Telangana Rashtra Samithi's (TRS) Bheemrao Baswanthrao Patil said the amendment was the need of the hour.

The NCP's Supriya Sule asked why liquidation is being looked at as an option. "Right now, the economy is in the doldrums and there are markers screaming for help," she said.

She supported the Bill but raised issues like the presence of only a single credit agency.

The BJD's Pinaki Misra said there are 14 benches of NCLT in India, of which one is yet to be functional and also sought clarification on the conflict between the IBC and other statutes.

Government agencies "mindlessly" go after some companies, he alleged, saying "anybody and everybody is allowed to be chargesheeted".