Jaitley Opts For Trial And Error On Insolvency Code
Jaitley says the insolvency regime is uncharted territory and that changes will have to be made when called for.
Union Finance Minister Arun Jaitley today said that the Insolvency and Bankruptcy Code is an “uncharted territory” for India and amendments will have to be made when situations arise which were not previously anticipated.
“For all of us, therefore, it is a learning experience,” Jaitley said addressing the Rajya Sabha after Congress leader P Chidambaram initiated a discussion on the Insolvency and Bankruptcy Code Amendment Bill 2017.
“As we move further, we will require evolution. We may even learn from mistakes and correct them. It is quite likely to happen,” he said while winding up a debate on the bill, which was later approved by the Rajya Sabha through a voice vote.
Earlier, former Finance Minister Chidambaram while “broadly” welcoming the insolvency code, said clauses in the new amendment which exclude a number of persons from bidding for stressed assets were "counterproductive".
"By making clauses so broad, everyone is the financial world is likely to be excluded," Chidambaram said in the Rajya Sabha. This would mean that a lot of these stressed assets would eventually be taken over by foreign entities which doesn't necessarily bode well for the economy, he added.
If there are not enough bidders due to the “overinclusive” clauses of exclusion, then the companies will be sold in bits and pieces which isn’t the objective of insolvency, Chidambaram said.
In his reply, Jaitley said an amendment had been made to ensure that the committee of creditors is not bound to accept any bid if it is not viable. "Ultimately, creditors will have to decide whether they want to take a haircut or not," he said.
If the government did not have such a broad exclusion list then the same people, or related persons, "who ran the company to the ground" would come back to buy the stressed at a 40-50 or 60 percent discount, the finance minister added. "Nothing would change, except that the lenders take a haircut," he said.
Jaitley assured members of the Upper House that as and when the bill requires changes, the government will table it in the Parliament. He urged members to wait and see how the resolution of the twelve large accounts on the Reserve Bank of India’s first list goes through before coming to a conclusion.
A committee has been put in place to evaluate whether a different regime is needed for the resolution of stressed medium and small-medium enterprises which will submit its report in three months, Jaitley said.
Watch this conversation with former State Bank of India Managing Director Pradeep Kumar on the likely impact of the IBC Amendment Bill.