Parliament Passes Insolvency & Bankruptcy Code Amendment Bill
Finance Minister Arun Jaitley on January 2 said the government had entered into an unchartered territory as far as bankruptcy and insolvency Code was concerned and would continue to modify the law dealing with the issue.
"Insolvency and bankruptcy is an area in which it is only in the recent years that we have chartered into. It is a learning experience," the minister said while winding up a debate on the Insolvency and Bankruptcy Code Amendment Bill, which was later approved by the Rajya Sabha through a voice vote.
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, was passed by the Lok Sabha last week.
The government, Jaitley said, had been encountering situations which were not anticipated earlier and assured the House that it would continue to take corrective action.
The Bill seeks to replace an ordinance which was promulgated in November to prevent unscrupulous persons from misusing or vitiating the provisions of the Insolvency and Bankruptcy Code (IBC).
The ineligible persons or entities will include undischarged insolvent, wilful defaulter and those whose accounts have been classified as non-performing asset (NPA). These persons, however, can become "eligible to submit a resolution plan" if they clear all the overdue amounts with interest and other charges relating to their NPA accounts. Those defaulters who had participated in the insolvency proceedings before November 23 can also bid for stressed assets provided they clear their dues in a month.
Responding to the concerns of the members, he said the whole effort was to make banking sector robust and detach it from politics.
"You need a strong banking system ...You need banks which are able to lend money to large industries, to infrastructure projects, to small industry, for educational loans. ...It is all part of the economy that you need a robust banking system," he said.
Jaitley said during the insolvency process, banks and unsecured creditors would have to take some haircut and if the same management comes back, nothing would change.
The objective of the Bill is to allow creditors to move to the National Company Law Tribunal (NCLT) in case of insolvency.
"We have now started that resolution process ...There are several hundreds of them and almost more than 500 have been disposed of. Creditors are using these procedures," the minister said.
He said large pending cases were broadly in two categories, one with large assets, functional plants and factories and the other are either trading companies or EPC companies with little assets.
Jaitley said as far as asset-owning companies were concerned, fetching the best prices was the target and any bid which was not viable could be rejected. It is for creditors to decide how much haircuts they wanted, he said.
Earlier, the Opposition had asked the government to identify willful defaulters of bank loans.
With inputs from Housing News