Insolvency and Bankruptcy Code (Amendment) Bill passed in Rajya Sabha

Insolvency and Bankruptcy Code (Amendment) Bill passed in Rajya Sabha

Aditya AK

The Rajya Sabha yesterday passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2019. The Bill was introduced in the Upper House on July 24.

Among other changes, the Insolvency and Bankruptcy Code (Amendment) Bill seeks to tweak provisions related to time limits, specifies minimum payouts to operational creditors under resolution plans, and specifies the manner in which the representative of a group of financial creditors should vote.

As per the Statement of Objects and Reasons, the Bill aims to address concerns surrounding undue delays cause by extensive litigation, seeks to ensure that all creditors are treated fairly, and to bring in clarity to the voting process of financial creditors represented by the authorised representative.

Watch: Kapil Sibal debates Insolvency and Bankruptcy Code (Amendment) Bill, 2019 in Rajya Sabha

Watch: Finance Minister Nirmala Sitharaman’s rebuttal

The Amendment Bill seeks to make the following changes to the Insolvency and Bankruptcy Code:

(a) Explanation to definition of “resolution plan” in clause (26) of Section 5 to clarify that a resolution plan may include the provisions for corporate restructuring, including by way of merger, amalgamation and demerger to enable the market to come up with dynamic resolution plans in the interest of value maximisation.

(b) Section 7(4) amended to provide that if an application has not been admitted or rejected within fourteen days by the Adjudicating Authority, it shall provide the reasons in writing for the same.

(c) Section 12(3) amended to mandate that the insolvency resolution process of a corporate debtor shall not extend beyond three hundred and thirty days from the insolvency commencement date, which will include the time taken in legal proceedings. If the process is not completed within the said period, an order requiring the corporate debtor to be liquidated under clause (a) of sub-section (1) of Section 33 shall be passed.

(d) Insertion of sub-section (3A) in Section 25A to provide that an authorised representative under Section 21 (6A) will cast the vote for all financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent of the voting share of the financial creditors he represents.

(e) Section 30(2) amended to provide that–

(i) operational creditors shall receive an amount that is not less than the liquidation value of their debt or the amount that would have been received if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priorities in Section 53 of the Code, whichever is higher;

(ii) the financial creditors who do not vote in favour of the resolution plan shall receive an amount that is not less than the liquidation value of their debt;

(iii) the provisions shall apply to the corporate insolvency resolution process of a corporate debtor–

(1) where a resolution plan has not been approved or rejected by the Adjudicating Authority; or

(2) an appeal is preferred under Section 61 or 62 or such appeal is not time barred under any provision of law for the time being in force; or

(3) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan.

(f) Amendment of Section 31(1) to clarify that the resolution plan approved by the Adjudicating Authority shall also be binding on the Central Government, any State Government, or any local authority to whom a debt in respect of payment of dues is owed.

(g) Amendment of Section 33(2) to clarify that the committee of creditors may take the decision to liquidate the corporate debtor any time after its constitution until the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.

Read the Bill:

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