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.
Replying to the debate on the Insolvency and Bankruptcy Code (Second amendment) 2018 in the Upper House, Finance Minister Piyush Goyal explain its objective was to provide resolution to small bankrupt firms and, at the same time, take stringent action against big bankrupt businesses.
Parliament has passed the Insolvency and Bankruptcy Code (Second Amendment) Bill,2018 with the Rajya Sabha approving it today. The Lok Sabha had passed it earlier.
The Bill seeks to clarify that allottees under a real estate project should be treated as financial creditors.
As per the bill, home buyers will get due representation in the Committee of Creditors that takes a call on resolution proposals, making them an integral part of the decision making process. The Bill allows the withdrawal of a resolution application submitted to the National Company Law Tribunal under the Code. This decision can be taken with the approval of 90 per cent of the committee of creditors.
The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December 2015. It was passed by Lok Sabha on 5 May 2016. The Code received the assent of the President of India on 28 May 2016. Certain provisions of the Act have come into force from 5 August and 19 August 2016.The bankruptcy code is a one stop solution for resolving insolvencies which at present is a long process and does not offer an economically viable arrangement. A strong insolvency framework where the cost and the time incurred is minimised in attaining liquidation has been long overdue in India. The code will be able to protect the interests of small investors and make the process of doing business a less cumbersome process.
Important features of this Bill :-
Insolvency Resolution :
The Code outlines separate insolvency resolution processes for individuals, companies and partnership firms.The process may be initiated by either the debtor or the creditors. A maximum time limit, for completion of the insolvency resolution process,has been set for corporates and individuals. For companies, the process will have to be completed in 180 days, which may be extended by 90 days, if a majority of the creditors agree. For start ups (other than partnership firms), small companies and other companies (with asset less than Rs. 1 crore), resolution process would be completed within 90 days of initiation of request which may be extended by 45 days.
Insolvency regulator:
The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it. The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the Reserve Bank of India.
Insolvency professionals:
The insolvency process will be managed by licensed professionals. These professionals will also control the assets of the debtor during the insolvency process.
Bankruptcy and Insolvency Adjudicator:
The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies:
(i) the National Company Law Tribunal for Companies andLimited Liability Partners firms
(ii) the Debt Recovery Tribunal for individuals and partnerships
