Parliament has passed Insolvency and Bankruptcy Code (Amendment) Bill, 2017 after it was passed by both the houses. The Bill amends Insolvency and Bankruptcy Code (IBC), 2016, and replaces Ordinance promulgated in November 2017 to pave way for tightening loopholes in existing code and make resolution process more effective.
The IBC was enacted by the Parliament in 2016 to find time-bound resolution for ailing and sick firms, either through closure or revival, while protecting interests of creditors. Successful completion of resolution process is expected to aid in reducing rising bad loans (NPA-non Performing assets) in the banking system.
Key Features of Bill
The bill redefines resolution applicant mentioned in code as person who submits resolution plan after receiving invite by insolvency professional to do so. It amends provision related to eligibility in IBC to state that insolvency professional will only invite those resolution applicants to submit plan, who fulfil certain criteria laid down by him with approval of committee of creditors and other conditions which may be specified by Insolvency and Bankruptcy Board.
It prohibits certain persons from submitting resolution plan in case of defaults. These include: (i) wilful defaulters, (ii) promoters or management of the company if it has outstanding non-performing debt for over year and (iii) disqualified directors, among others.
The bill bars the sale of property of a defaulter to such persons who is ineligible to be a resolution applicant during liquidation. It inserts provision to specify that person contravening any provisions of IBC, for which no penalty has been specified, will be punishable with fine ranging between Rs. 1 lakh to Rs. 2 crore.