Union Finance Minister Nirmala Sitharaman on Monday the Insolvency and Bankruptcy Code Amendment Bill 2019 contains measures to dispel concerns over extensive litigation causing undue delays in insolvency proceedings.
"Each of these amendments which are being brought in is for greater clarity which is required so that no grey area prevails. There should be no need for interpretations, which are going against the original intent of the Insolvency and Bankruptcy Code (IBC) 2016," she said in the Rajya Sabha.
The bill has proposed a time limit of 330 days for completion of the resolution process including the litigation.
"Many big insolvency cases are all waiting for resolution. The balance of interest of all the stakeholders was becoming an issue. Therefore, we have brought in this set of amendments for the consideration of the House," said Sitharaman.
"I hope the members would have gone through the papers to see why it is so urgent, why because of the various different interpretations which are coming through the tribunals and courts, there is a fear that the original intent with which this Parliament passed the IBC is probably getting diluted. We should not allow the dilution for want of clarity," said Sitharaman.
The minister said the Code is being also monitored by central government expert committee. The amendments are being made after due stakeholder consultations, she said.
Earlier this month, the Union Cabinet approved the proposal to carry out seven amendments to the IBC 2016 through the Insolvency and Bankruptcy Code Amendment Bill 2019.
According to an official statement, the amendments aim to fill critical gaps in the corporate insolvency resolution framework as enshrined in the Code while simultaneously maximising value from the corporate insolvency resolution process.
A specific provision has been added to the IBC saying all dissenting financial creditors and operational creditors will receive an amount not less than the liquidation value of the corporate debtor or the amount in accordance of section 53 of the IBC.
The bill provides for an explanation in the definition of 'resolution plan' to clarify that a resolution plan proposing the insolvency resolution of corporate debtor as a going concern may include the provisions for corporate restructuring, including by way of merger, amalgamation and demerger.
It also provides clarity that the Committee of Creditors may take the decision to liquidate the corporate debtor any time after its constitution and before preparation of information memorandum.
The IBC amendment bill also clarifies that the resolution plan will be binding on all stakeholders, including central and state government or local authority to whom a debt is owed.
This is the third tranche of amendments being made to the insolvency and bankruptcy law introduced in May 2016 to create an effective mechsm for dealing with non-performing assets.
( With inputs from ANI )