The Insolvency and Bankruptcy Code (Amendment) Bill, 2017 was introduced in Lok Sabha on 28 December 2017. The Bill seeks to replace the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017.
The Bill aims to bar those with non-performing accounts from bidding to acquire insolvent companies or their assets.
Provisions of the Insolvency and Bankruptcy Code (Amendment) Bill, 2017
• The Bill prohibits certain persons from submitting a resolution plan in case of defaults. These are - (i) wilful defaulters, (ii) promoters or management of the company having non-performing debt for over a year, (iii) disqualified directors, among others
• It bars the sale of property of a defaulter to any person not eligible to be a resolution applicant. These persons may be considered undesirable to take charge of the company.
• A penalty of minimum Rs 1 lakh and maximum Rs 2 crore has been proposed for contravening any of the provisions of the Insolvency and Bankruptcy Code (IBC).
• It allows asset reconstruction companies, banks and alternative investment funds registered with the Securities and Exchange Board of India to bid for insolvent companies.
• The bill allows the promoter to submit a resolution plan after clearing overdue amounts with interests and other charges.
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017
• The Ordinance amends Sections 2, 5, 25, 30, 35 and 240 of the Insolvency and Bankruptcy Code, 2016 and inserts new Sections 29A and 235A in the Code.
• Clause (e) of Section 2 of the Code was substituted with three Clauses to facilitate the commencement of Part III of the Code relating to individuals and partnership firms in phases.
• Clause (25) and (26) of Section 5 of the Code which define “Resolution Plan” and “Resolution Applicant” are amended to provide clarity.
• Section 25(2)(h) of the Code was amended to enable the Resolution Professional, with the approval of the Committee of Creditors (CoC) to specify eligibility conditions while inviting Resolution Plans from prospective Resolution Applicants.
• Section 29A, new addition to the code, makes certain persons ineligible to be a Resolution Applicant. Those being made ineligible are Willful Defaulters, who are associated with non-performing assets, who have executed an enforceable guarantee in favour of a creditor.
• The Committee of Creditors can reject a Resolution Plan submitted before the commencement of the Ordinance where the Resolution Applicant is not eligible as per the new Section 29A.
• Section 30(4) is amended to explicitly obligate Committee of Creditors to consider feasibility and viability of the Resolution Plan.
• Through the amendment in Section 35(1)(f), sale of property has been barred to a person who is ineligible to be a Resolution Applicant under Section 29A.
• Section 235A, new addition to the code, provides for punishment for breaking provisions where no specific penalty or punishment was provided earlier.
Union Government promulgates ordinance to amend Insolvency and Bankruptcy Code, 2016
What: Introduced in Lok Sabha
When: 28 December 2017