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Insolvency and Bankruptcy Bill
The Chairperson( Insolvency and Bankruptcy Bill) Board said " Recovery is incidental under the Insolvency and Bankruptcy Code. Its primary objective is rescuing companies in distress".
On 6th March 2020, the houses of Parliament passed the bill of 2020(Amendment) Act of Insolvency and Bankruptcy Code. Rajya Sabha agreed to the proposals made under the bill via voice vote first. Then, Lok Sabha passed the bill with the underlying theme of 'The Real Reform'. On 12th March 2020, the Gazette published the bill officially.
Finance minister Nirmala Sitharaman on an earlier debate said that the amendments are in sync with time. The 'changing requirements' and 'requirement of fine tuning' are the reasons for the need for change in the new law, as the Code has been amended thrice since it's inception in 2016. She also added that the government kept in mind the interest of home buyers and the requirement of minimum number of home buyers which has been included in IBC to avoid " frivolous litigations".
Repealing the 2019" ordinance" of Insolvency and Bankruptcy code, the proposals passed in the bill by the government are that 100 individuals or 10% of creditors have to come together to initiate corporate Insolvency proceedings under the amendments of IBC.
Adding a clause to Section 7 of IBC, the amendment bill proposed to make this change retrospectively, that it seeks to give 30 days for cases where a single home buyer has taken a company to insolvency to comply with the revised criteria from the time of commencement of the Act.
The proposed threshold will be applicable in all cases where a financial debt is owed to a class of creditors or is in the form of securities or deposits, and provides for appointing a trustee or agent to act as an authorized representative of all the financial creditors.
The bill has also introduced clause 34A with regard that the corporate debtor shall not be prosecuted for such an offence from the date of approval of the resolution plan. It has also expanded the definition of 'a financing debt'. The bill further added explanation in Sec. 14 of the IBC.
Until an order approving the resolution plan or appointing a liquidator is passed, the resolution professional would continue to manage the stressed company even after expiration of the Corporate Insolvency Resolution Period (CIRP). This has been empowered in the bill.
IBC has taken a big step in providing a clean slate to buyers of stressed companies by barring criminal proceedings and seeking to remove bottlenecks and streamline the corporate insolvency resolution princess. It also aims to provide protection to new owners of a loan defaulter company against prosecution for misdeeds of previous owners. Therefore, the overall theme of the amendments proposed in the IBC is to remove the hurdles being faces and it to make it more attractive to investors.
