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Lok Sabha passes Insolvency and Bankruptcy Code Amendment Bill – Economic Times

A surge in the number of companies being dragged through insolvency proceedings after the suspension of the Insolvency and Bankruptcy Code (IBC) is lifted is unlikely, according to finance minister Nirmala Sitharman.

Responding to a discussion on the IBC amendment bill in Lok Sabha, Sitharaman said stakeholders have other options for loan stress resolution and initiation of insolvency proceedings for defaults occurring during the pandemic have been banned forever.

“Our assessment is it’s unlikely given that the stakeholders have very many options even during the Covid period for recovery of loans…and the defaults occurring during this pandemic period are being kept out forever,” she said on Monday.

The minister also said the increased threshold for initiating insolvency proceedings from Rs 1 lakh to Rs 1 crore would protect micro, small and medium enterprises (MSMEs) from being taken to insolvency court.

Later, the lower house passed the Insolvency and Bankruptcy (Second Amendment) Bill, 2020 by voice vote.

On Saturday, Rajya Sabha passed the bill to replace the ordinance promulgated on June 5, as per the minister’s announcements as part of the Atma Nirbhar Bharat package, aimed at protecting companies from being dragged to insolvency court for pandemic-induced loan defaults.

Provisions of the bill suspend sections 7,9 and 10 of the IBC disabling financial and operational creditors creditors and corporate debtors from initiating insolvency proceedings for defaults occurring from March 25 onwards for six months, extendable to a year.

Sitharaman said the suspension was ‘time-bound’ and ‘specific character-bound’ to distress caused by Covid, stating that insolvency proceedings which could be triggered for reasons prior to the pandemic were excluded from the suspension.

The bill was part of the government’s phased approach to ensure that “Companies are in a position to stand on their own, however frail they may be”, after the lockdown measures are completely removed, Sitharaman added.