The Lok Sabha on Thursday passed amendments to the Insolvency and Bankruptcy Code, with Union Finance Minister Nirmala Sitharaman stating that the intention of the bill was to help struggling business survive and grow stronger.
“The spirit behind the law is not to allow companies to die. Liquidation of a company is not the sole agenda of the Insolvency and Bankruptcy Code,” Ms. Sitharaman said.
With the passing of the bill, as many as seven sections of the Code stand amended. Under the Code, a financial creditor may file an application before the National Company Law Tribunal (NCLT) for initiating the insolvency resolution process. The NCLT must find the existence of default within 14 days. Thereafter, a Committee of Creditors (CoC), consisting of financial creditors, will be constituted for taking decisions regarding insolvency resolution. The CoC may either decide to restructure the debtor’s debt by preparing a resolution plan or liquidate the debtor’s assets.
“Once the Corporate Insolvency Resolution Process (CIRP) begins, it has to be completed in 330 days, including litigation stages and judicial process,’’ said the minister.
She added that the changes would also bring in more clarity on various provisions, including time-bound disposal at the application stage of the resolution plan and treatment of financial creditors. The approved resolution plan would be binding on Central and state governments as well as various statutory authorities.
Participating in the debate, Pinaki Misra of the BJD said there were 14 benches of the NCLT in India, out of which one was yet to be functional. “Government agencies go after some companies and then anybody and everybody is allowed to be chargesheeted,” he said.
Gaurav Gogoi of the Congress noted that the performance of the Insolvency Bankruptcy Code has been a mixed bag. “Liquidation of companies, especially the ones in the real estate sector, also puts home buyers’ life savings at risk,” he said.
M. Srinivasulu Reddy of the YSR Congress referred to the death of Cafe Coffee Day founder V.G. Siddhartha and said industries were sick because of business failures. “While the government is working towards the ease of doing business there is a fear psychosis in the minds of businesses, which has to be addressed,” he said.
