Cabinet clears Ordinance to amend bankruptcy code

The Union Cabinet on Wednesday cleared an Ordinance to amend the Insolvency and Bankruptcy Code (IBC). This paves the way for a relief to home buyers if a real estate firm faces insolvency.

The new amendments to IBC treat the home buyers at a par with financial creditors in legal rights of insolvent firms, sources privy to the Cabinet meeting said.

The amendment also proposed relief for small and medium companies and exempted them from various provisions in the dispute resolution process in which barring wilful defaulters, the owners of MSMEs can bid for their own companies in the resolution process. This will help their turn around at a faster rate.

It approved recalibration of the voting threshold to help NPA improve resolution process, sources said.

The NPA resolution process has already seen a major success. The recent resolution of one of the largest NPAs, Bhushan Steel to Tata Steel under the insolvency code have helped lenders recover Rs 36,400 crore in cash.

“With these amendments, this process is expected to become even more streamlined and ultimately help banks, an important pillar of the economy, to recover NPAs and help the economy move towards faster growth,” the Cabinet is believed to have said after passing the amendment, sources said.

Earlier, via Ordinance last year, the government had debarred promoters with non-performing assets of more than a year and wilful defaulters from presenting a resolution plan during insolvency proceedings.

An Insolvency Law Committee had earlier suggested to the Ministry of Corporate Affairs that home buyers should be treated as financial creditors. This, the committee said, will allow them to equitably participate in an insolvency resolution process.