The ordinance to amend the Insolvency and Bankruptcy Code that will bar defaulters from bidding for stressed assets, has been given the President's nod.
President Ram Nath Kovind on Thursday, 22 November, signed the ordinance that was sent to him by the Union Cabinet the previous day.
The Insolvency and Bankruptcy Code, being implemented by the Corporate Affairs Ministry, became operational in December 2016 and provides for a time-bound insolvency resolution process. Over 300 cases have already been approved by the National Company Law Tribunal (NCLT) to be taken up under the law.
“The ordinance targets big defaulters and makes it difficult for them to bid for distressed assets which were of their own making,” said Finance Minister Arun Jaitley. He said the ordinance does not ban them from bidding for stressed assets, but would make it difficult for them, and disentitles them from doing it.
“The amendments’ aim to keep out such persons who have wilfully defaulted, are associated with non-performing assets (NPAs), or are habitually non-compliant, and, therefore, likely to be a risk to successful resolution of insolvency of a company," a press release from the Ministry of Corporate Affairs said.
Those who have their accounts classified as non-performing assets for one year or more, and are unable to settle their overdue amounts, would also be ineligible. As per the ordinance, corporate bodies, promoters, and associate companies undergoing insolvency resolution or liquidation under the Code, would not be eligible for bidding for their stressed assets.Press release from the Ministry of Corporate Affairs
He said one solution could be that the NPA holder at least comes forward and services the interest by Rs 10,000 to Rs 15,000 crore in an asset of, say, Rs 1 lakh crore.
The ordinance amends Sections 2, 5, 25, 30, 35 and 240 of the present code, and inserts new Sections 29A and 235A.
A new Section 29A makes certain people ineligible to bid for stressed assets. These include wilful defaulters, and those who have their accounts classified as NPAs for a year or more and are unable to settle their overdue amounts before filing an application to bid for the stressed assets.
The sale of property to a person who is ineligible under Section 29A has been barred through the amendment in Section 35(1)(f).
In order to ensure that the provisions of the code are enforced effectively, the new Section 235A prescribes punishment for contravention of the provisions where no specific penalty is provided. The punishment is a fine which shall not be less than Rs 1 lakh, but which may extend to Rs 2 crore.
The changes proposed are also expected to help streamline the process of selecting buyers for stressed assets.
(With inputs from IANS and PTI)
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