Bills and Acts

Summary of latest bill and acts passed or pending in 2018 in Parliament of India with their salient features and issues for Current Affairs 2018 preparation for various examinations.

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Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 Promulgated

President Ram Nath Kovind has assented to the promulgation of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 on June 6, 2018. This ordinance makes some fine-tuning mechanisms in the Insolvency and Bankruptcy Code, 2016.

Key Points

This ordinance brings some specific changes affecting mainly real estate and financial sectors. The notable changes are as follows:

Homebuyers Recognized as Financial Creditors

After this amendment, the IBC law will recognize the homebuyers as financial creditors, giving them due representation in the Committee of Creditors (CoC). Thus, now home buyers will be an integral part of the decision making process. The CoC will also have representation from security holders, deposit holders and all other financial creditors.

Special Provisions for MSME

The amendment ordinance gives some special benefits to the Micro, Small and Medium Sector Enterprises. Now, the promoters of MSMEs are allowed to bid for their companies as long as they are not wilful defaultersand don’t attract any other related disqualification. This has corrected the anomaly in the section 29A of the existing act which had barred promoters of defaulting assets from bidding for their assets.

Withdrawal of Insolvency Application

The ordinance permits the withdrawal of the insolvency applications only if it is approved by 90% vote share of the CoC. Further, the CoC voting threshold has been brought down to 66 percent from 75 percent for all major decisions such as approval of resolution plan, extension of insolvency period etc. This is to encourage resolution versus liquidation.

Other provisions

Other notable provisions are as follows:

  • It brings more clarity by laying down mandatory timelines, processes and procedures for corporate insolvency resolution process.
  • Addresses some issues such as non-entertainment of late bids, no negotiation with the late bidders and a well laid down procedure for maximizing value of assets.
  • Exempts pure play financial entities from being disqualified on account of NPA and NPA acquired under Insolvency Code shall not disqualify an entity for the next three years.
  • Successful resolution applicants will get a minimum one-year grace period to fulfill various statutory obligations.
  • It also addresses the much litigated issue of enforcement of guarantees.

This part, the corporate debtors who want to themselves trigger insolvency will need shareholders approval via special resolution.

Significance for Real Estate

This ordinance provides relief to home buyers by recognizing their status as financial creditors. Due representation in the Committee of Creditors (CoC) makes them integral part of the decision-making process. Section 7 of the law will allow financial creditors to file application seeking insolvency resolution process. This is important because many home buyers are facing hardships on account of delayed and incomplete real estate projects.

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Government releases draft Model Agricultural Produce and Livestock Contract Farming Act, 2018

The Union Ministry of Agriculture and Famers Welfare has unveiled Model Agriculture Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 to ensure better price to farmers. It is aimed at reducing farmers’ risks by creating assured market for their produce at pre-agreed price, while encouraging investment from agribusiness and food processing industries by enhancing productivity and cost efficiency.

Contract farming

Under contract farming, agricultural production (including livestock and poultry) can be carried out based on pre-harvest agreement (contract) between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations). The producer can sell agricultural produce at specific price in future to buyer as per agreement. Under contract farming, producer can reduce risk of fluctuating market price and demand. The buyer can reduce risk of non-availability of quality produce.

Salient features

The draft Model Act seeks to create regulatory and policy framework for contract farming and servives. Based on this draft Act, states legislatures can enact law on contract farming as agriculture falls under state list of Constitution. It is promotional and facilitative Act and not regulatory in its structure. It not only covers contract farming in agriculture crops but also in livestock, dairy and poultry products.

The Model Act lays special emphasis on protecting interests of farmers, considering them as weaker of two parties entering into a contract. It also takes into consideration services contracts all along the value chain including pre-production, production and post-production in addition to contract farming.

It has provision for Registering and Agreement Recording Committee (Officer) for purpose at district, block, taluka level for online registration of sponsor and recording of agreement. It makes mandatory for covering contracted produce under crop and livestock insurance in operation.

It keeps contract framing outside ambit of Agricultural Produce Marketing Committee Act. Under it, no permanent structure can be developed on farmers’ land or premises. It does not vest right, title of interest of the land on sponsor.

It provides for promotion of Farmer Producer Organization (FPOs) or Farmer Producer Companies (FPCs) to mobilize small and marginal farmers. Under it, FPO/FPC can be contracting party if so authorized by farmers. No rights, title ownership or possession can be transferred or alienated or vested in contract farming sponsor etc.

It assures market safety to contract farming producer by ensuring buying of entire pre-agreed quantity of one or more of agricultural produce, livestock or its product of as per contract. It establishes Contract Farming Facilitation Group (CFFG) for promoting contract farming and services at village or panchayat at level. It provides accessible and simple dispute settlement mechanism at the lowest level possible for quick disposal of disputes.

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