She was responding to a debate on the Bankruptcy and Insolvency Code (Second Amendment) bill, 2020, in Rajya Sabha, which passed proposed legislation to replace an ordinance in this regard with voice vote.
“The corporate debtor often has guarantors. Therefore, for comprehensive corporate insolvency resolution and liquidation, we felt that it was necessary that the insolvency of the corporate debtor and its guarantors be considered together to the extent possible,” Sitharaman said in response to some members who raised the issue.
In June, an ordinance was enacted to amend the Insolvency and Bankruptcy Code (IBC) whereby no new insolvency proceedings will be initiated for at least six months from March 25 amid the coronavirus pandemic.
Failure to comply with repayments as of March 25, the day the national lockdown began to curb coronavirus infections, would not be considered to initiate insolvency proceedings for at least six months.
The minister also clarified that insolvency proceedings against companies that default on their loans before March 25 will continue and that the amendment will not stop those cases.
On questions from members about the urgency of bringing the ordinance first, Sitharaman said that “between sessions, if there is a need for an ordinance because the situation on the ground demands it, I think the duty of a receptive government is at least use the ordinance to show that we are there with the people of India. “
“So, to that extent, I’m sure the House will appreciate that when the government decides the ordinance that’s why, and every time the next session happens, we come back,” she said.
Due to the COVID-19 pandemic, the minister said, companies faced problems.
So it was decided “that it was better to suspend articles 7, 9 and 10 of the IBC to prevent legal persons, who are in danger due to the unprecedented situation, from being pushed into insolvency proceedings.”
Sections 7, 9 and 10 deal with the initiation of the business insolvency resolution process by the financial creditor, the operating creditor and the business debtor, respectively.
The minister further said that the IBC is a critical part of the business now and cited data to show how the code had performed.
Citing data from commercial bank NPAs during 2018-19, he informed the Chamber that Lok Adalats recovered 5.3%, the Debt Recovery Courts (DRT) recovered 3.5% and SARFAESI recovered 14.5%. %.
On the other hand, IBC ensured 42.5 percent recovery.
Sitharaman further said that most of the resolutions are happening to make the company a going concern.
“The priority is to keep the company running rather than liquidating them as soon as possible,” he said, adding that 258 companies were saved from bankruptcy through the IBC process, while 965 companies went into liquidation.
“… 258 companies were rescued, which means that employment is back with them. Companies that have been liquidated in total, three-quarters of them were missing and they were also given a liquidation solution and at least it was reduced to minus job loss, “he said. said.
According to her, 258 rescued companies had assets of ₹96,000 crore and the 965 companies sent for liquidation had assets of ₹38,000 crore.
So, in terms of value, the assets redeemed were about two and a half times the assets that went to liquidation, Sitharaman said.
The IBC, which came into effect in December 2016, has been amended five times.
The amendment provides for the suspension of Sections 7, 9 and 10 of the IBC for at least six months and extendable up to one year from March 25, 2020. In this regard, a new section ’10 A ‘has been inserted in the IBC.
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