The government will promulgate an ordinance to further amend the insolvency law to remove ambiguities and ring-fence successful bidders from prosecution for offences committed by previous promoters of corporates concerned.
The Union Cabinet on Tuesday approved an ordinance to amend the Insolvency and Bankruptcy Code (IBC), 2016, that would also help in ensuring smooth implementation of the law, according to an official release.
The Code has already been amended thrice and a bill to amend it was introduced in the Lok Sabha on December 12.
Briefing reporters after the Cabinet meeting on Tuesday, Union Minister Prakash Javadekar said the amendments would also help bring more clarity and facilitate FDI (Foreign Direct Investment) inflows.
"Under the amendments, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease," the release said.
Further, the corporate debtor would not be prosecuted for such an offence from the date the resolution plan has been approved by the adjudicating authority, if the resolution plan results in the change in the management.
It would also not be applicable for those in control of a company after insolvency resolution, provided the person concerned was not a promoter or in the management or control of the corporate debtor or a related party.
"A person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or court" would also not be eligible, as per the release.
The proposed amendments assume significance against the backdrop of instances of enforcement agencies taking action in case of companies where the resolution process has already been completed.
"Subject to relevant provisions the corporate debtor shall, as required, extend all assistance and co-operation to any authority investigating an offence committed prior to the commencement of the corporate insolvency resolution process," the release said.