Parliament approves changes to bankruptcy law

Parliament approves changes to bankruptcy law

Finance Minister Nirmala Sitharaman speaks in the Lok Sabha during the ongoing Budget Session of Parliament, in New Delhi, Thursday, Aug 1, 2019. (LSTV/PTI Photo)

Parliament on Thursday approved amendments to the bankruptcy law restoring secured creditors' priority claims in receiving payments from sale or liquidation process of sick companies.

The Lok Sabha passed the Insolvency and Bankruptcy Code (Amendment) Bill that sets a 330-day timeline for insolvency resolution cases, including any legal challenges. The Bill was passed by the Rajya Sabha on Monday.

Responding to a debate in the Lok Sabha, Finance Minister Nirmala Sitharaman said the amendments would also bring in more clarity on various provisions, including time-bound disposal at the application stage for resolution plan and treatment of financial creditors.

Among others, the approved resolution plan would be binding on central and state governments as well as various statutory authorities.

Sitharaman said proposed amendments also respond to issues pertaining to financial creditors in the wake of a recent ruling with respect to financial and operational creditors.

The amendments were necessitated to plug loopholes in the law that led to the at par treatment given to secured creditors and operational creditors in the Essar Steel by the National Company Law Appellate Tribunal (NCLAT).

Sitharaman quoted a Supreme Court judgement to say that with the implementation of the Code, there is no longer a defaulter's paradise.

Referring to the issue of home buyers raised by some opposition members, the Minister said the provisions of the bill strengthen the hands of homebuyers and the government would endeavor to do full justice to them.

Sitharaman said as of June 30, as many as 2162 bankruptcy cases were admitted of which 174 have been settled, 101 withdrawn, 120 resolved and 475 moved into liquidation. She said 1292 cases are still being heard.