Rajya Sabha nod for IBC amendment

  • Countering the Opposition’s view that the Insolvency and Bankruptcy Code (Amendment) Bill approved by the Upper House on 2 Jan 18 would undermine potential competition for the stressed assets going under the hammer by stipulating unduly broad exclusion criteria, finance minister Arun Jaitley stressed that the aim was to exclude wilful defaulters from taking over the management of companies after banks had taken losses on loans.
  • Replying to the debate in the Rajya Sabha, Jaitley reiterated that the proposed changes in rules were expected to help streamline the process of selecting buyers for stressed assets. Jaitley also made it clear that the government has not written off any bank loan and the liability of the borrowers for repayment of the bad loans remained.
  • The Lok Sabha had passed the Bill on 29 Dec 17. An ordinance had already kept out “such persons who have wilfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company.”
  • The Bill, which the President may sign into law anytime now, makes it clear that defaulters, including promoters, whose accounts have been classified as non-performing assets for at least a year, can submit a resolution plan only after clearing the overdue amounts with interests and other charges.
  • Jairam Ramesh, a former Cabinet minister, raised concern about lenders taking “big haircuts” or discounts on claim value of NPAs.
  • According to the Bill, defaulting promoters, who had already submitted resolution plans for insolvent companies before an Ordinance in Nov 17 made them ineligible to do so without clearing dues first, will get up to a month to come clean to be eligible to bid for the stressed firms.
  • The relaxation will, however, be applicable only to defaulters in those cases where the resolution period has not exceeded the stipulated time frame. The IBC allows six months (or nine months, if the adjudicating authority has granted a 90-day extension) to approve a resolution plan.

External Link : http://www.financialexpress.com/economy/stressed-assets-right-to-keep-defaulters-out/999496/