Parliament on Thursday passed the Insolvency and Bankruptcy Code (amendment) Bill 2019, which brought in eight amendments as part of efforts to ensure that the code remains vibrant and not lend itself to any interpretative ambiguities.
The Bill — which was earlier this week passed by the Rajya Sabha — was on Thursday passed by the Lok Sabha after a nearly three-hour long discussion on the amendments.
This is the third time the government has brought in amendments to the IBC since its enactment into law in 2016.
Replying to the discussion on the Bill, Finance Minister Nirmala Sitharaman asserted that IBC has been effective in the two-and-half years of its functioning and that “behavioural change” was visible in corporate sector after its implementation.
Periodic amendments to IBC were being required in response to the developments outside Parliament, she said.
Among other things, the Bill seeks to ensure timely admission of insolvency cases and completion within the newly set deadline of 330 days (it was 270 days earlier). The resolution plan under the corporate insolvency resolution process will also be binding on the Centre, State and local authorities.
As for the large pendency before the NCLT, Sitharaman highlighted that as much as 73 per cent of the cases waiting for resolution are actually from the BIFR stable and these are not a result of the last few years.
She highlighted that the government has been taking steps to increase capacity of National Company Law Tribunal (NCLT) and increased its benches from 10 to 15. Also 26 new members have been added taking total strength to 52, she added.
Focus on revival
Sitharaman also made it clear that the IBC was not looking to force companies into liquidation, but focused on their revival and continuing as going concerns.
“Not allowing companies to die is the spirit behind IBC. If there is any prospect of company getting revived, the solution is not to go to liquidation. but ensure it is going concern,” she said.
It is not the intent here that every problematic issue related to companies are taken only with liquidation as an agenda. “IBC doesn’t keep only liquidation as an agenda,” she said.
Haircuts
Sitharaman said that the government does not play a role on haircuts — the extent of write off that banks undertake as part of resolution plan to get the company back on track.
“It is Committee of creditors that decided the haircuts. So far financial creditors have got 43 per cent of their claims and 188 per cent of the liquidation value,” she said.
Jet Airways issue
The Finance Minister said that stakeholders of Jet Airways are free to work out their own resolution and IBC is only optional. She revealed that The Netherlands had admitted Jet Airways for bankruptcy, but NCLT had refused to admit it. The government is now considering the introduction of “cross-border insolvency” based on UNCITRAL model, she added
IBC delays
Sitharaman also made it clear that the government wants the whole Corporate Insolvency Resolution Process (CIRP) to be completed by the newly set deadline of 330 days including the litigation stage and also the judicial process stage.
Reeling out data on the delays, she said that there are now 335 cases whose resolution are pending for over 330 days. There are 445 cases pending which are pending in excess of 270 days but less than 330 days. As many as 221 cases are pending resolution between 180-270 days.
As many as 475 cases have been sent for liquidation. Their aggregate liquidation value was ₹24,417 crore against claim of ₹3,46,655 crore.
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