New Delhi, Jul 29: A Bill providing for resolving insolvency in companies and among individuals was on Monday passed by the Rajya Sabha.
The Insolvency and bankruptcy Code (Amendment) Bill 2019 was passed by the Rajya Sabha by a voice vote. The Bill amends the Insolvency and Bankruptcy Code, 2016 that provides a time-bound process for resolving insolvency in companies and among individuals.
Replying to a debate on the Bill in the Upper House, Finance Minister Nirmala Sitharaman said the IBC benefits small as well as big companies. She said that even before the implementation of the Bill, 6079 cases have already been solved by the IBC process and an amount of 2,76,000 cr resolved.
She said that because of the Insolvency and Bankruptcy Bode (Amendment) Bill, 2019, defaulters have to face the law of the land. Under the Code, a financial creditor may file an application before the National Company Law Tribunal (NCLT) for initiating the insolvency resolution process. The NCLT must find the existence of default within 14 days.
Thereafter, a Committee of Creditors (CoC) consisting of financial creditors will be constituted for taking decisions regarding insolvency resolution. The CoC may either decide to restructure the debtor’s debt by preparing a resolution plan or liquidate the debtor’s assets.
The CoC will appoint a resolution professional who will present a resolution plan to the CoC. The CoC must approve a resolution plan, and the resolution process must be completed within 180 days. This may be extended by a period of up to 90 days if the extension is approved by NCLT.
If the resolution plan is rejected by the CoC, the debtor will go into liquidation. The Code provides an order of priority for the distribution of assets in case of liquidation of the debtor. This order places financial creditors ahead of operational creditors (e.g., suppliers). In a 2018 Amendment, home-buyers who paid advances to a developer were to be considered as financial creditors. They would be represented by an insolvency professional appointed by NCLT.
The present Bill strengthens provisions related to time-limits. It also specifies the minimum payouts to operational creditors in any resolution plan.
Thirdly, it specifies the manner in which the representative of a group of financial creditors (such as home-buyers) should vote.
The Code states that the insolvency resolution process must be completed within 180 days, extendable by a period of up to 90 days. The Bill adds that the resolution process must be completed within 330 days. This includes time for any extension granted and the time taken in legal proceedings in relation to the process. On the enactment of the Bill, if any case is pending for over 330 days, the Bill states it must be resolved within 90 days. (UNI)