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A bill to amend the Insolvency and Bankruptcy Code (IBC) 2016, allowing home buyers to be treated as financial creditors and seeking to set up a special dispensation for small sector enterprises, was passed by the Parliament.
The bill, which was passed in Lok Sabha on July 31, was approved in the Rajya Sabha today by voice vote. The legislation seeks to replace the June 6 ordinance that sought to put these amendments into force to aid quick resolution of several bankrupt firms.
Interim Finance Minister Piyush Goyal said its objective was to provide resolution to small bankrupt firms and, at the same time, take stringent action against big bankrupt businesses. He said the bill aims to ensure that all cases are led to resolution instead of liquidation.
"We want faster resolution of cases. ....We don’t want liquidation. Insolvency will not help the country. Assets worth crores should put to use" - Interim Finance Minister Piyush Goyal
Goyal said the Insolvency Law Committee, which was set up in November 2017, had submitted the report on May 26 this year. Every recommendation of the panel has been accepted and incorporated in the amendments.
The law committee’s report has said that a resolution plan should be approved by a panel of financial creditors by a vote of not less than 66 percent. For routine decisions, it requires 51 percent of the votes.
Goyal said the government is trying to increase the strength of National Company Law Appellate Tribunal to address the pendency of cases. “The number of courts, judicial members and technical members are being increased,” he said. Besides, a group has been set up to see speedy resolution of about 40,000 cases in NCLAT that are simple in nature and can be resolved by imposing non-discretionary penalty, he added.
On a member’s query regarding fewer recovery of assets through the resolution process, Goyal said all is well. "If you look at the cases so far, 32 cases are resolved through resolution and up to 55 percent have been recovered.”
Earlier, it used to take an average of three years to resolve a matter, it has now come down to one year, the interim finance minister said. He added that even the cost of resolution has come down to one percent from nine percent earlier.
"Now there is fear among big borrowers that they have to repay their loans. Earlier, there was a responsibility to repay loans was on small borrowers. Big players used think it is not our problem, banks have to recover the loan. This equation has changed today" - Interim Finance Minister Piyush Goyal
Earlier, Minister of State for Finance P P Chaudhary termed the bill as a game changer for the economy. Opposing the bill, D Raja (CPI) said that frequent changes to the law is being done to help defaulters and the government wants to bail out the defaulters.
In the Bhushan Steel case, he alleged that the banks lost Rs 21,000 crore but a corporate house gained this amount. He sought to know why the government has a “soft corner” for corporates. “The government should bail out the poor and not the corporates. The voting requirement is reduced to 66 per cent from 75 per cent to help one corporate,” Raja said.
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