Lok Sabha passes changes to bankruptcy code

New Delhi: Seeking to plug loopholes to restrict willful and other loan defaulters from submitting resolution plans to let them take charge of the company undergoing insolvency, the Lok Sabha on Friday passed a bill that seeks to amend the Insolvency and Bankruptcy Code (IBC) ordinance that became operational last year.

Approved by voice vote, the Insolvency and Bankruptcy Code Amendment Bill, 2017, seeks to allow loan defaulters to participate in the bidding process but only after they pay the overdue interest and make their bad loan accounts operational by clearing other charges relating to these accounts. But those persons and entities prohibited by the Sebi and corporate debtors are not eligible to apply.

“If we had not done this, then all such defaulters would have rejoiced because they would have merrily walked back into these companies by paying only a fraction of these amounts. That is something which besides being commercially imprudent would also be morally unacceptable. That is the real rationale behind this particular bill,” finance minister Arun Jaitley said while replying to a debate in the Lower House.

Admitting that the legislation has been a “learning experience” for the government as it was for the first time that such a jurisprudence was being introduced in India, the minister said “certain improvements were necessary” and clarity was required on certain matters.

Taking a pot-shot at Congress MP Gaurav Gogoi’s assertion that NPAs have escalated during the rule of the present government, Mr Jaitley, referring to NPAs, said they were a “legacy problem” mainly due to reckless lending undertaken by the banks during the former UPA regime.

Mr Jaitley said: “Gogoiji has studied in good educational institutions of the world and he must have many times heard of the proverb that there were three types of lies — lies, damned lies and statistics. Today he has himself become a victim of the third one.”