Insolvency and Bankruptcy Code (Amendment) Bill, 2017 was first introduced by finance minister Arun Jaitley on Thursday (December 28, 2017) and passed by Lok Sabha on Friday (December 29, 2017). The bill seeks to replace an ordinance which was promulgated in November to prevent unscrupulous persons from misusing or vitiating the provisions of the Insolvency and Bankruptcy Code, 2016.
Highlights of the Bill (Comparative Analysis)
|Basis||Under Insolvency and Bankruptcy Code, 2016||As Amended in Insolvency and Bankruptcy (Amendment) Bill, 2017|
|Meaning of ‘resolution applicant’
|It defines ‘resolution applicant’ as a person who submits a resolution plan to the resolution professional||‘resolution applicant’ is a person who submits a resolution plan after receiving an invite by the insolvency professional to do so.
|Eligibility for ‘resolution applicant’
|It states that an insolvency professional will take control of the defaulting company, and invite applicants to submit resolution plans||The Bill amends this provision to state that an insolvency professional will only invite those resolution applicants to submit a plan, who fulfil certain criteria laid down by him (with the approval of the committee of creditors), and other conditions which may be specified by the Insolvency and Bankruptcy Board.|
|Submission of Resolution Plan [Section 30(4)]||It specifies that the committee of creditors will approve a resolution plan with 75% majority||The Bill amends this provision to state that the committee of creditors may approve a resolution plan by a vote of not less than seventy-five per cent. of voting share of the financial creditors, after considering its feasibility and viability, and such other requirements as may be specified by the Insolvency and Bankruptcy Board.
The Bill prohibits the committee of creditors from approving a resolution plan submitted before the promulgation of the Insolvency and
Bankruptcy Code (Amendment) Ordinance, 2017, where the plan has been submitted by a person ineligible to be a resolution applicant.
|Liquidation [Section 35(1)(f)]||The Code allows the insolvency
professional to sell the movable or immovable property or actionable claims of the corporate of the debtor in case of liquidation.
|The Bill amends this provision to state that the liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant.|
|Newly Inserted Section (Section 29A) – Persons not eligible to be resolution applicant.||The Bill insert new section which prohibits certain persons from submitting a resolution panel. A
person will be ineligible to submit a plan if:
he is an undischarged insolvent (individual unable to repay his debt),
(i) he is a willful defaulter,
(ii) his account has been identified as a non-performing asset for more than a year and he has not repaid the amount before submitting a plan,
(iii) he has been convicted of an offence punishable with two or more years of imprisonment,
(iv) he has been disqualified as a director under the Companies Act, 2013,
(v) he has been prohibited from trading in securities by SEBI,
(vi) he is the promoter or in the management of a company which has indulged in undervalued, preferential, or fraudulent transactions,
(vii) he has given guarantee on a liability of the defaulting company undergoing resolution or liquidation and has not honoured the guarantee,
(viii) he has indulged in these specified activities abroad, or
(ix) he is connected to any person mentioned above (including promoters, management, or any person related to them).
The Bill exempts scheduled commercial banks, asset reconstruction companies and alternate investment funds if they are connected to any such person.
|Newly Inserted Section (Section 235A) – Punishment where no specific penalty or punishment is provided.||If any person contravenes any of the provisions of this Code or the rules or regulations made thereunder for which no penalty or punishment is provided in this Code, such person shall be punishable with fine which shall not be less than one lakh rupees but which may extend to two crore rupees.|
Author: C S Ekta Maheshwari is the Author of this article and is a Practicing Company Secretary. The Author can be reached at email@example.com
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