The Government on Wednesday introduced The Insolvency and Bankruptcy Code (Amendment) Bill 2019, that seeks to ensure timely completion of the debt resolution process and provide more clarity on the rights of stakeholders.
Finance Minister Nirmala Sitharaman introduced the bill seeking as many as seven amendments to the Insolvency and Bankruptcy Code, which provides for resolution of bad loans.
The minister referred to a few points about the importance of the Bill in the Rajya Sabha.
But the leader of opposition Ghulam Nabi Azad told the chair that she can talk about it at the time of consideration of the bill and sought continuation of the discussion on The Protection of Children From Sexual Offences (Amendment) Bill 2019.
The proposed amendments to the Code are aimed at filling critical gaps in the corporate insolvency resolution framework while at the same time maximising value from resolution.
The changes in the law are aimed at timely admission of applications and timely completion of the corporate insolvency resolution process.
The bill also provides that if an application has not been admitted or rejected within 14 days by the adjudicating authority, it shall provide the reasons in writing for the same.
The bill also provides a deadline for completion of CIRP (Corporate Insolvency Resolution Process) within an overall limit of 330 days, including litigation and other judicial processes.
The proposed amended Code is also aimed at providing greater clarity on the permissibility of corporate restructuring schemes, clarity on rights and duties of authorised representatives of voters, manner of distribution of amounts amongst financial and operational creditors as well as the applicability of the resolution plan on all statutory authorities.
The bill provides for an explanation in the definition of “resolution plan” to clarify that a resolution plan proposing the insolvency resolution of the corporate debtor as a going concern may include the provisions for corporate restructuring, including by way of merger, amalgamation and demerger.
This is to enable the market to come up with dynamic resolution plans in the interest of value maximisation.
It also provides that the votes of all financial creditors covered under section 21(6A) shall be cast in accordance with the decision approved by the highest voting share (more than 50%) of financial creditors on present and voting basis.
This will have retrospective effect where the resolution plan has not attained finality or has been appealed against.
The bill also brings clarity saying the resolution plan shall be binding on all stakeholders including the Central Government, any State Government or local authority to whom a debt in respect of the payment of the dues may be owed.
The bill also provides clarity that the Committee of Creditors may take the decision to liquidate the corporate debtor any time after the constitution of the Committee of Creditors and before preparation of Information Memorandum.