After days of disruption, the Rajya Sabha on Thursday passed two Bills —The Insolvency and Bankruptcy Code (Amendment) Bill, 2020 and The Mineral Laws (Amendment) Bill, 2020 .
The Insolvency and Bankruptcy Code (IBC) Amendment Bill, that will help ring-fence successful bidders of insolvent companies from the risk of criminal proceedings for offences committed by previous promoters, was passed by the Lok Sabha on March 6. The Bill replaces an ordinance.
The IBC, which came into force in 2016, has already been amended thrice. Introducing the Bill , Finance Minister Nirmala Sitharaman said the Bill was an exact replica of the ordinance and the changes recommended by the Standing Committee of Finance would be incorporated later.
The Minister said the need for amendment in the IBC arose because of the “changing requirement” and “requirement of fine tuning” the law.
‘This is euthanasia’
Opening the debate on the Bill, Congress member Jairam Ramesh said only 10% of defaulted loans had been recovered other than seven big ones to be resolved so far. The law was brought to find a way to keep the firms afloat. However, Mr. Ramesh pointed out that out of 970 cases referred to the IBC, 780 had been liquidated, indicating a mortality rate of 80%. “This is euthanasia,” he said.
Mr. Ramesh said that against admitted claims of ₹3.51 lakh crore, ₹1.50 lakh crore had been recovered by way of auctioning the defaulting firms to new buyers. The recovery was 43%, implying that banks took a hair cut of 57% on their loans, he said.
If the big seven firms — Electrosteel, Bhushan Steel, Monnet Ispat, Essar Steel, Alok Industries, Bhushan Power & Steel and Jyoti Structures — were excluded then the total recovery was 10%, he said, “This means banks took hair cut of 90%.”
He wanted a clause in the law that directed the small and micro enterprises to continue supplying goods and services to the defaulter firm dropped since this would hurt the MSME sector. “You should not sacrifice the interest of the MSME sector,” the Congress member said.
Many members expressed concern over the clause on homebuyers, treating them differently from financial creditors. The law says that the homebuyer can initiate insolvency proceedings against the builder only if 10% of the applicants come together. Samajwadi Party’s Ravi Prakash, BJD’s Amar Patnaik and CPI(M)’s K.K. Raagesh raised the issue.
Speaking later, Ms. Sitharaman said the government was taking care of the interest of homebuyers and the requirement of minimum number of homebuyers in the IBC had been included to avoid “frivolous litigations.”