A bill to amend the Insolvency and Bankruptcy Code (IBC) 2016, allowing home buyers to be treated as financial creditors and seeking to set up a special dispensation for small sector enterprises, was passed by Parliament today.
The bill, which was passed in Lok Sabha on July 31, was approved in the Rajya Sabha today by voice vote.
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 said its objective was to provide resolution to small bankrupt firms and, at the same time, take stringent action against big bankrupt businesses.
He said the bill aims to ensure that all cases are led to resolution instead of liquidation.
"We want faster resolution of cases. ....We don't want liquidation. Insolvency will not help the country. Assets worth crores should put to use," he said.
The Minister said the Insolvency Law Committee, which was set up in November 2017, had submitted the report on May 26 this year and every recommendations of the panel has been accepted and incorporated in the amendments.
On the approval of a resolution plan, the Minister said the report said it should be approved by a panel of creditors by a vote of not less than 66 per cent of the voting share of financial creditors. For routine decisions, it should be 51 per cent vote requirement.
Goyal said the government is trying to increase the strength of NCLAT to address the pendency of cases. "The number of courts, judicial members and technical members are being increased," he said.
Besides, a group has been set up to see speedy resolution of about 40,000 cases in NCLAT that are simple in nature and can be resolved by imposing non-discretionary penalty, he added.
On a member's query regarding less recovery of assets through the resolution process, Goyal said "there is a good recovery. ...If you look at the cases so far, 32 cases are resolved through resolution and up to 55 per cent have been recovered."
Earlier, it used to take an average of three years to resolve a matter, it has now come down to one year. Earlier the cost of resolution used be higher at 9 per cent, now it has come down to one per cent, he said.
He also stated that the NCLAT was an independent body and the government does not interfere in its functioning.
The minister said it is not that in all cases, the promoters are wiful defaulters. Wherever promoters are wilful defaulters, the action should be taken strictly.
"Now there is fear among big borrowers that they have to repay their loans. Earlier, there was a responsibility to repay loans was on small borrowers. Big players used think it is not our problem, banks have to recover the loan. This equation has changed today," he noted.
Opposing the bill, D Raja (CPI) said that frequent changes to the law is being done to help defaulters and the government wants to bail out the defaulters.
In the Bhushan Steel case, he alleged that the banks lost Rs 21,000 crore but a corporate house gained this amount. He sought to know why the government has a "soft corner towards the corporates."
"The government should bail out the poor and not the corporates. The voting requirement is reduced to 66 per cent from 75 per cent to help one corporate," he alleged.
Neeraj Shekhar (SP), S R Balasubramaniyan (AIADMK), Kahkashan Perween (JD-U), P Battacharya (Cong) were among others who supported the bill, but expressed concern over the government taking the ordinance route to amend various laws.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)