On Tuesday, the Parliament gave its final nod to the Bankruptcy Bill. The bill was passed by the Lok Sabha last week. All amendments to the insolvency and bankruptcy code were approved that aimed at keeping defaulting promoters away from the resolution process of insolvent companies. Earlier, the government had earlier passed an order aiming to keep such persons at bay who are non-compliant, have knowingly defaulted, are associated with non-performing assets and therefore, can prove to be a source of risk to successful resolution of insolvency of a company.”
Giving a firm answer against it, Finance Minister Arun Jaitley in the upper house of Parliament remarked that any kind of changes in rules would help in streamlining the process of selecting buyers for stressed assets.
Former Finance Minister P. Chidambaram said that several clauses of the bill were flawed. Exclusion basically should have been kept to a very limited number. He even added that as the clauses are so broad and over-inclusive, almost all from the financial world would be excluded.
This move was aimed at excluding willful defaulters from succeeding over the management of companies after the banks had suffered losses on loans.
Several opposition lawyers expressed their concern saying that the new rules could bring down competition for stressed assets, thereby resulting in lower recovery rates for the creditors. One of them even questioned the Code’s application with respect to Micro, Small, and Medium Enterprises (MSME). His concern was addressed by Mr. Jaitley who said that Insolvency Legal Committee was examining if separate rules were required.
In June, the central bank focused on 12 of the country’s biggest loan defaulters and ordered them to surrender themselves to the bankruptcy courts as it tried to bring down a record $147 billion of soured loans that have been accumulated in India’s banking sector.