The Rajya Sabha passed the 2020 Bankruptcy and Insolvency Code (Second Amendment) bill on Saturday by oral vote.
The Union’s Finance Minister, Nirmala Sitharaman, had presented the bill for consideration and approval in the Upper House. The bill is intended to replace the 2020 Bankruptcy and Insolvency Code Ordinance (Amendment).
The Ordinance was enacted on June 5 to provide relief to companies from the initiation of insolvency proceedings due to the sudden outbreak of the Covid-19 pandemic and the consequent 68-day lockdown that disrupted the economy.
The ordinance prohibited the initiation of bankruptcy proceedings for breaches arising during the six months as of March 25, 2020 and extendable up to one year. Therefore, it prohibits the initiation of any insolvency proceedings by any creditor or the debtor company.
The government proclaimed the ordinance in response to the sudden outbreak of the Covid-19 pandemic that hit businesses and put businesses on edge for reasons beyond their control. Relief was also provided to stressed units, as no significant resolution was expected in this type of adverse business environment.
The government suspended certain sections of IBC to prevent companies from becoming insolvent. The government’s intention was to grant immunity to companies stressed during this period from Covid-19 through this ordinance.
Speakers on the bill included Congressman Vivek Tankha, who said the ordinance, which was the precursor to the bill, was hastily introduced. He asked the government to examine certain provisions, including the one-year period clause.
Responding to the point raised by the member of Congress, Sitharaman said that not “exceeding one year” if he is removed naturally would mean an excessive delegation to the executive.
Sitharaman also listed how the government’s steps toward insolvency law had led to a large number of resolutions.
The bill was approved by voice vote. Among other members, KK Ragesh (CPI-M) said why help was not provided to farmers who also faced financial difficulties. END
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