On 2nd January 2018 Indian Parliament Passed the Insolvency and Bankruptcy Code Amendment Bill, 2017 by approval of both Lok Shaba and Raja Shaba. The Bill amends The Insolvency and Bankruptcy Code (IBC) 2016, and replaces Ordinance promulgated in November 2017 for lock the loop holes in the previous bill announced in 2016.
Insolvency and Bankruptcy Code Bill, 2016
Insolvency and Bankruptcy Code Bill, 2016 announced by the parliament on 28th May, 2016. The main objective of the bill is to reduce the percentage of Non Performing Asset (NPA) by finding time-bound resolution for Weak firms in the country, either through closure or Improvement, while protecting interests of creditors.
Highlights Of the Insolvency and Bankruptcy Code Amendment Bill, 2017:
The Insolvency and Bankruptcy Code Amendment Bill, 2017 prohibits certain persons from submitting a resolution plan in case of defaults. These include:
- Willful defaulters,
- Promoters or management of the company if it has an outstanding non-performing debt for over a year
- Disqualified directors, among others. Further, it bars the sale of property of a defaulter to such persons during liquidation.
By these Amendments, the bill prohibits certain persons from submitting resolution plans and participating in the liquidation process. One argument may be that these persons may be considered undesirable to take charge of the company. However, this may reduce competition among applicants and result in lower recoveries for creditors.