To streamline the corporate insolvency resolution process, the parliament on March 12 passed amendments to The Insolvency and Bankruptcy Code (Amendment) Bill (IBC), 2020. This comes in the backdrop of the crisis that India’s fourth-largest private sector lender, Yes Bank is going through.
Crux of the Matter
IBC Amendment Bill was passed in Rajya Sabha on March 12 and by Lok Sabha on March 6. The new law will provide protection to new owners of a loan defaulter company against prosecution for wrongdoings of past owners. The amendment makes compulsory a minimum threshold for homebuyers to initiate insolvency and provide immunity to a corporate debtor from past liabilities once it’s acquired.
My dissent to Recommendations of Standing Committee of Finance on 5% or 100 Homebuyers Bar introduced by Insolvency& Bankruptcy Code Amendment Ordinance 2019 to access’s IBC process. NDA/BJP is in cahoots with Builder Lobby to rip millions of home buyers of their life savings. pic.twitter.com/BPYQ2gVU4y — Manish Tewari (@ManishTewari) March 5, 2020
The government had brought in an ordinance in December 2019 to make necessary changes. In January 2020, the Supreme Court had ordered status quo on the provisions that restricted power. The Bill amends the Code the effect that a licence, permit, registration, quota, concession, clearances or a similar grant or right will now not be terminated during the moratorium period.
The government is both responsive and is committed to delivering its promises in tune with changing times. – Nirmala Sitharaman, Finance Minister
Congress MP Jairam Ramesh suggested the government to revisit the Insolvency and Bankruptcy Code w.r.t MSME sector to protect their interests. He also highlighted that under the present law, the recovery rate is only 10%. Answering doubts over MSME, the Finance Minister said, “the banks have been asked to pay dues to stakeholders in order to maintain the liquidity.”
Trinamool Congress MP Manas Ranjan Bhunia said, since the passing of the bill in 2016, the government has introduced three ordinances and four amendments for rectification, which shows a lack of knowledge and confusion of the government.”
The appellate #tribunal rejected the objections raised by the creditors, which wanted the #NCLAT to follow Section 53 of #IBC for distribution of funds. #ILFShttps://t.co/CoKAv8aEKV — Firstpost (@firstpost) March 13, 2020
The statistics suggest that as of 1st January 2020, nearly 15 thousand cases were resolved based on Insolvency and Bankruptcy Code out of around 43 thousand cases.
Curiopedia
The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December 2015. It was passed by Lok Sabha on 5 May 2016 and by Rajya Sabha on 11 May 2016. The bankruptcy code is a one-stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement. The code aims to protect the interests of small investors and make the process of doing business less cumbersome. More Info
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