IBC Amendments To Ensure Greater Timeliness, Says Nirmala Sitharaman

Amendments to the Insolvency and Bankrutpcy Code, 2016, are aimed at ensuring greater timeliness for resolution process that has to be completed in 330 days, said Finance Minister Nirmala Sitharaman in Lok Sabha on Thursday.

Moving the Insolvency and Bankruptcy Code (Amendment) Bill, 2019, for passage in Lok Sabha, she said that the IBC changes would also bring in more clarity on various provisions, including time-bound disposal at the application stage and treatment of financial creditors.

Seven sections of India’s bankruptcy law will be changed by the IBC amendment bill.

Once the Corporate Insolvency Resolution Process begins, it has to be completed in 330 days, including litigation stages and judicial process, Sitharaman said, citing the proposed IBC amendments. Among others, the approved resolution plan would be binding on central and state governments as well as various statutory authorities.

According to the finance minister, the proposed IBC amendments also responds to issues pertaining to financial creditors as in the ArcelorMittal-Essar Steel case.

The National Company Law Appellate Tribunal had recently ruled that Essar Steel’s Committee of Creditors had no role in distribution of claims and brought lenders (financial creditors) and vendors (operational creditors) on par.

Sitharaman quoted a Supreme Court judgement to say that with implementation of the IBC, there is no longer a defaulter's paradise.

The IBC amendment bill was passed by the Rajya Sabha on Monday.

Participating in the Lok Sabha debate, Congress' Member of Parliament Gaurav Gogoi said the performance of the bankruptcy law has been a mixed bag. He also raised concern about liquidation of companies, especially the ones in the real estate sector that puts homebuyers' life savings at risk.

Bharatiya Janata Party’s MP Sanjay Jaiswal, however, said that the Insolvency and Bankruptcy Code has improved ease of doing business in India.