Insolvency proceedings against corporates defaulting on loans prior to Mar 25 to continue: Nirmala Sitharaman  

Business
Typography

Because of the ecosystem being created by the IBC, companies are making sure that they solve the problem even without going to the NCLT, she said

Finance Minister Nirmala Sitharaman said that insolvency proceedings against corporates defaulting on loans prior to March 25 will continue and the amendment will not prevent such cases.

Sitharaman was replying to the debate on the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 in Rajya Sabha on Saturday. The Upper House passed the proposed legislation to replace an ordinance in this regard with a voice vote.

She also said that law provides for carrying out insolvency and bankruptcy proceedings against corporate debtors as well personal guarantors together.

"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 are considered together to whatever extent it is possible," she told the House.

Because of the ecosystem being created by the Insolvency and Bankruptcy Code (IBC), companies are making sure that they solve the problem even without going to the NCLT, said the finance minister.

“This govt wants to make sure it responds to the developing situation on the ground,” she said.

Because of the COVID-19 pandemic, the minister said, businesses faced trouble. 

So it was decided "that it was better to suspend Sections 7, 9 and 10 of IBC so that we can prevent corporate persons, which are experiencing distress on account of the unprecedented situation, being pushed into insolvency proceedings", Sitharaman said.

Sections 7, 9 and 10 deal with initiation of corporate insolvency resolution process by financial creditor, operational creditor and corporate debtor, respectively.

The minister further said the IBC is a critical part of business now, and cited data to show how the code had performed.

She said that Lok Adalats recovered 5.3 percent, Debt Recovery Tribunals (DRTs) recovered 3.5 percent and SARFAESI recovered 14.5 percent during 2018-19 as far as bad loans are concerned.

On the other hand, IBC ensured 42.5 percent of recovery, added the finance minister.

With inputs from agency

Image credit: File photo

All Comments