Bill temporarily suspends initiation of CIRP under the code
AGENCIES / NEW DELHI
Rajya Sabha today passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020. The Bill amends the Insolvency and Bankruptcy Code 2016 which provides a time bound process for resolving insolvency in companies and among individuals. Finance Minister Nirmala Sitharaman moved the Bill. Insolvency is a situation where individuals or companies are unable to repay their outstanding debt.
The Bill seeks to temporarily suspend initiation of the corporate insolvency resolution process, CIRP under the Code. It replaces the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 promulgated in June this year. The Bill provides that for defaults arising during the six months from 25th March of this year, CIRP can never be initiated by either the company or its creditors. The central government may extend this period to one year through notification.
Replying to the discussion, Finance Minister Nirmala Sitharaman said that Insolvency and Bankruptcy is the significant part of the business and it is helping the companies and people to resolve the issues without going to NCLT. She said, amendments were brought due to the Covid-19 situation to give immunity to the business from insolvency proceedings in this critical situation. Appreciating the IBC mechanism she informed that it has helped in the recovery of the amount related to the non performing assets of scheduled commercial banks.
Giving the comparative analysis of the recovery made by the Lok Adalat, SARFAESI and IBC in 2018-19, she informed that under the IBC mechanism 42.5 percent recovery has been made which is the highest and it helped to recover more than 77 thousand crore rupees. On the employment front, she said, 258 companies were rescued under the IBC mechanism.
Initiating the discussion, Vivek Tankha of Congress questioned the several provisions of the Bill urging that these must be relooked for the interest of the public. He said, some of the provisions will benefit the big companies and prove to be detrimental for the small companies including MSMEs. Dinesh Trivedi of TMC said that legislation must not be brought in hurry without larger consultation. He suggested that money be given to the needy people which will create demand and garner tax for the government. Amar Patnaik of BJD said that the quality of the resolution has to be improved.
Ravi Prakash Verma of Samajwadi Party said that NPA is continuously rising in the country and the number of willful defaulters has also increased. Praful Patel of NCP said that resolution professionals are not fully equipped and it is promoting corruption while resolution of the cases. He said, NCLT benches are less in numbers and these are overburdened.
Prof. Manoj Jha of RJD said that people are losing jobs. He asked the government to infuse money to promote consumption and demand in the economy. Anil Desai of Shiv Sena said the government must ensure that dishonest elements should not take advantage of the pandemic situation.
Arun Singh of BJP termed the Insolvency and Bankruptcy Bill as a remarkable and bold step. Mr. Singh said, India’s ranking in Ease of Doing Business has improved under the present regime. A Vijayakumar of AIADMK, P. Wilson of DMK, RCP Singh of JD(U), K. Ravindra Kumar, Veer Singh of BSP, ND Gupta of Aam Aadmi Party, Binoy Viswam of CPI also spoke on the Bill.