President approves ordinance on Insolvency and Bankruptcy Code

President approves ordinance on Insolvency and Bankruptcy Code

New Delhi, Nov 23: President Ram Nath Kovind on Thursday gave consent to ordinance for amending the Insolvency and Bankruptcy Code (IBC). The President’s assent comes a day after the Cabinet approved the ordinance.
The ordinance will prevent wilful defaulters or promoters with some history of defaulters from bidding for their own or other stressed assets at a discount. It will prevent misuse of IBC as the defaulters may also be prohibited from submitting a resolution plan.
The Ordinance will amend sections 2, 5, 25, 30 and 240 and has added two new sections – 29A and 235A
The new section will also include those who haven’t been able to settle their unpaid dues including the interest and those who have executed an enforceable guarantee in favour of a creditor, in respect of a corporate debtor.
The other new section — 235A — provides for punishment for contravention of the provisions where no specific penalty is provides.
The Ordinance, besides specifying persons who can’t apply, also mentions that the Committee of Creditors (CoC) will need to ensure viability of a resolution plan before approving it.
The Insolvency and Bankruptcy Board of India (IBBI) has also been given additional powers, the Finance Ministry said.
The IBC, which came into effect in December 2016, provides a time-bound insolvency resolution process. The ordinance will now be presented in the upcoming Winter Session of Parliament.
The ordinance amending IBC has turned the implicit into the explicit, Pradeep Kumar, former MD of SBI, said, adding that the bankers will need to do forensic and investigative audit before allowing promoters to bid.