Insolvency & Bankruptcy Code Amendment Bill passed in LS

RSTV Bureau
File Photo of Parliament Housing Building in New Delhi.

File Photo of Parliament Housing Building in New Delhi.

Insolvency and Bankruptcy Code Amendment Bill, 2017, a legislation that will prevent unscrupulous persons from misusing or vitiating the provisions of the insolvency was passed on Friday in Lok Sabha by a voice vote. Among the provisions, loan defaulters can now participate in bidding under the insolvency proceedings after paying due interest and making their bad loan accounts operational.

The government cannot allow loan defaulters to “merrily walk back” by paying a fraction of the due amount, Finance minister Arun Jaitley said while replying to the debate in the Lok Sabha.

The ineligible persons or entities will include undischarged insolvent, wilful defaulter and those whose accounts have been classified as non-performing asset.

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.

Taking a dig at Congress party, Jaitley said that NPA was a “legacy problem” and was mainly on account of the reckless lending undertaken by the banks during the erstwhile UPA regime.

Congress MP Gaurav Gogoi had earlier said that NPAs, which were low during the UPA regime, have escalated during the rule of the present government.

Citing World Bank data, Gogoi said gross NPA ratio was 2.7 per cent in 2011, 3.4 per cent in 2012 and 4 per cent in 2013. After the NDA government took over in 2014, the NPA ratio rose to 4.3 per cent, and further to 5.9 per cent in 2015 and peaked to 9.2 per cent in 2016, he added.

Jaitley responded by saying that during the Congress-led regime efforts were made to brush the NPA problem under the carpet by “window dressing” and “evergreening” of bad loans. “What was below the carpet has now come above the carpet,” he stressed.

He said the amendment to the Bankruptcy Code became necessary to prevent defaulters from taking advantage of the situation to come back into the management by paying a fraction of amount.

Earlier while moving the bill for passage, Jaitley said the legislation has been a “learning experience” for the government as it was for the first time that such a jurisprudence was being introduced in India.

He said “certain improvements were necessary” and clarity was required on certain matters. The amendment also introduces people who are not eligible to apply for insolvency and this includes categories like those prohibited by the SEBI and corporate debtors.

The amendments were necessitated because under the old provisions even an ineligible people would have applied, he said.

During the debate, N K Premachandran (RSP) and Saugata Roy (TMC) questioned the urgency shown by the government to bring in an ordinance.

Roy said the new amendment will hurt more as not all bad loans are a result of mala fide intentions. He said the steel industry was reeling under severe pressure and if people are barred, then it may not help improve the situation or bring the economy back on track.

“The government should take a fresh look at the bill,” Roy said.

(With inputs from PTI)