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Ordinance to amend the Insolvency and Bankruptcy Code (IBC) has been signed by the President Ram Nath Kovind. The amendment is done to prevent the bidding of assets by the defaulters in the resolution proceedings while bank faces losses. The amendment has peen passed with a view to prevent unscrupulous, undesirable person from misusing and violating the IBC by putting in place proper safeguards.
The Government stated that the orderly resolution of distress in the banking system has defeated the purpose of the IBC. The ordinance signed by the president ensures that the promoters who have not repaid the lenders do not get entry through back doors in their companies. The ordinance has also put a barr on bidding by associates and personal guarantors.
The amendment is said to be act as a booster for global investors as earlier promoter intervention prevented them. The ordinance also provides a window to the promoter, if the promoter has repaid the lenders before setting up of resolution plan in place to prevent its companies from slipping out of their hands. The opportunities which are provided to promoters are such as Ruias of Essar Steel and the Singals of Bhushan Steel. Promoter can also convert the non-performing asset to the performing asset for participating in the resolution plan.
The ordinance is passed by the government as some of the big companies have that the National Company Law Tribunal have otherwise could ended up with original promoters. Most of the ineligible bidders accounts are classified as the Non-Performing Assets for more than a year and have a lot of overdue amount to settle including interest and charges before submitting the resolution plan.
Post Amendment, personal guarantors to the insolvent companies which are all set for resolution and proprietorships for resolutions will also be covered by the IBC. The Incharge of the resolution process in consultation with the committee of creditors can impose criteria for bidding of assets in light of the scale of the bankrupt entity.
The amendment also empower the committee of creditors to reject the resolution plan from the ineligible parties even after the presentation of plan.