Rajya Sabha approves amendments to Insolvency and Bankruptcy Code

The Rajya Sabha on Saturday passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020, whereby fresh insolvency proceedings will not be initiated for at least six months beginning March 25 amid the coronavirus pandemic.

The nationwide lockdown began on March 25. The bill seeks to replace an ordinance promulgated in this regard in June.

The law provides for carrying out insolvency and bankruptcy proceedings against corporate debtors and personal guarantors.

"The corporate debtor often has guarantors. So for comprehensive corporate insolvency resolution and liquidation, we felt it was necessary that the insolvency of the corporate debtor, as well as its guarantors, is considered together to whatever extent it is possible," Finance Minister Nirmala Sitharaman said in response to some members raising the issue.

The insolvency proceedings against corporates defaulting on loans prior to March 25 will continue and the amendment will not stall those cases.

"Priority is to keep the company to be a going concern rather than to liquidate them at the earliest," she said adding that 258 companies were saved from going bankrupt through the IBC process, while 965 firms went for liquidation.

"...258 companies were rescued which means employment is back again with them. Companies which have been liquidated in total, three-fourths of them were defunct and were also given liquidation solution and therefore at least loss of employment was reduced," she said.

According to her, 258 companies rescued had assets of Rs 96,000 crore and the 965 companies sent for liquidation had assets of Rs 38,000 crore.

The IBC, which came into force in December 2016, has been amended five times.