Insolvency & Bankruptcy Code Bill introduced in Lok Sabha
New Delhi: The move may prove to be a major relief to homebuyers, the government on Monday introduced Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018 in the Lok Sabha.
The amendments to the insolvency law which empowers home buyers to be recognised as financial creditors was introduced in the Lok Sabha in the midst of opposition parties objecting to certain changes in the Act alleging that the changes in the Bill is intended to "help one industry".
Union Finance Minister Piyush Goyal introduced the Bill in the Lower House. The bill replaced the Ordinance approved by the Union Cabinet in May.
As per the changes in the new bill, the amendments to the IBC has been made to give relief to the homebuyers by recognising their status as financial creditors, thus giving them due representation in the Committee of Creditors (CoC) and making them an integral part of the decision-making process.
While introducing the Bill, Goyal said, "The laws of recovering the loan in the time of the previous governments were very weak and the loans were not recovered from, what he called, the big ones. The big ones used to think that it is the bank's responsibility to recover the loan."
Goyal further said, "When the Insolvency and Bankruptcy Code was introduced the country's banking sector was going through a serious crisis and everyone were very much aware where the genesis of that crisis lies."
"Prime Minister Narendra Modi had spoken about the dire financial stress that the Indian banking system was facing because of indiscriminate and absolutely baseless lending that happened during the period of 2008-14," the Finance Minister said.
Goyal further said, "When the present government took over, the stress in the banking sector including the stressed assets and the NPAs was humungous and it was because of bad lending prior to 2014."
The bill also proposes to reduce the minimum voting threshold for the CoC to 66 per cent, from 75 per cent for key decisions-- a provision which was opposed by BJD member Bhartruhari Mahtab.
Opposition Congress and TMC also supported Mahtab, who said the decision was being taken to benefit "one industry".
Citing the resolution process of the textile firm Alok Industries, Mahtab said two major companies had jointly submitted before the CoC to acquire the company.
The changes have also prescribed a model timeline for different steps to be undertaken within the resolution deadline. The IBC permits a maximum of 180 days, extendable to 270 days, for resolution of a distressed company.