The Lok Sabha on Tuesday passed amendments to the Insolvency and Bankruptcy Code to provide relief to homebuyers and the MSME sector. Moving the bill, Finance Minister Piyush Goyal said that "we want to address concerns expressed by the MSME sector and homebuyers".
The bill - Insolvency and Bankruptcy Code (Second Amendment) Bill 2018 - aims at giving relief to the homebuyers by recognising them as financial creditors, a status that will make them an integral part of Committee of Creditors while dealing with bankruptcy cases.
The new amendments propose to reduce the minimum voting threshold for the CoC to 66 per cent, from the existing 75 per cent for key decisions - a provision which the opposition said was aimed at benefiting one corporate house.
The government had earlier stated that the voting threshold has been brought down to encourage resolution as opposed to liquidation.
The Finance Minister said that under the previous regime of SARFAESI and BIFR, the resolution cost of trouble companies was 9 per cent and recovery was 25 per cent after taking into account 4-6 years. However, in the IBC regime, the cost was less than one per cent and the recovery was over 55 per cent, he said.
Goyal also said that certain exceptions in the code have been made to help speedier resolution of stressed assets in the MSME sector.
Earlier in June, the government had promulgated an ordinance to recognise home buyers as financial creditors under the insolvency law. In a statement issued then, the government had said that the status of financial creditors would give them (the homebuyers) due representation in the Committee of Creditors and give them a greater say in decision making process.
The Bill also enables homebuyers to invoke Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016 against errant developers. Another major beneficiary would be Micro, Small and Medium Sector Enterprises (MSME), which form the backbone of the Indian economy as the biggest employer, next only to the agriculture sector.
The Bill does not disqualify the promoter to bid for his enterprise undergoing Corporate Insolvency Resolution Process (CIRP) provided he is not a wilful defaulter and does not attract other disqualifications not related to default. It also empowers the central government to allow further exemptions or modifications with respect to the MSME Sector, if required.
The opposition parties, however, dubbed the bill as 'tainted' and demanded that it be referred to a Standing Committee.
Senior Congress leader Veerappa Moily said that the National Company Law Tribunal has become "an instrument for siphoning off funds" of the treasury as banks were taking huge haircuts and the big firms were buying out insolvent companies for paltry sums.
"Be fair and refer the bill to the Standing Committee. Because you got stuck up in the NCLT, you brought in the bill. The Ordinance is tainted and sending it to the Standing Committee will remove the taint," he said
Moily, who is the Chairman of the Standing Committee on Finance, said that if the bill was referred to the Standing Committee, then it would submit its report within 15 days.
(Edited by Saurabh Sharma with inputs from PTI)