Parliament passes the Insolvency and Bankruptcy Code (Amendment) Bill, 2019
The Insolvency and Bankruptcy Code (Amendment) Bill, 2019 was passed by the Rajya Sabha on 29th July 2019 and thereafter the Lok Sabha on 1st August 2019 provided its assent to the Bill, to amend the Insolvency and Bankruptcy Code, 2016. The Bill seeks to inter-alia, enhance the time limits for completion of the corporate insolvency resolution process.
In light of the above, enumerated herein below are some of the salient features of the Bill:
Initiation of the corporate insolvency resolution process:
The Bill seeks to amend Section 7 of the Code to the extent that now the adjudicating authority has to also record its reasons in writing in the event it fails to admit or reject an application for initiation of the corporate insolvency resolution process by a financial creditor within the time frame presently specified under the Code i.e.14 (fourteen) days from the date of receipt of the application.
Time-limit for completion of corporate insolvency resolution process:
The Bill seeks to amend Section 12 of the Code whereby the time period for completion of the corporate insolvency resolution process has been increased from 180 days (which was further extendable for a further period of 90 days to 330 days from the insolvency commencement date, including any extension and time taken in legal proceedings, if any. On the enactment of the Bill, if any case is pending for over 330 days, the Bill states it must be resolved within a period of 90 days.
Representative of financial creditors:
The Bill has provided for insertion of a new sub-section 3A (a notwithstanding provision) under the present section 25A(3) of the Code whereby in the event an authorized representative represents several financial creditors, vote shall be casted in accordance with the decision taken by more than 50% of the financial creditors represented by him. The notwithstanding provision seeks to simplify the procedure for casting vote by an authorized representative, as presently the Code provides that the authorized representative has to cast vote on the basis of the instructions received from each financial creditor, to the extent of his voting share.
The Bill seeks to amend clause (b) of sub-section (2) of section 30 of the Code, whereby it is specified that any payment of debts of operational creditors shall not be less than (i) the amount to be paid in the event of a liquidation of the corporate debtor; or (ii) the amount to be paid under a resolution plan, if such amounts were distributed in accordance with the order of priority, whichever is higher of the above. The Bill has further also inserted an explanation to the definition of the term "Resolution Plan" under Clause 26 of Section 5 which may include provisions for the restructuring of the corporate debtor by way of merger, amalgamation and demerger.
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