The Lok Sabha on Tuesday approved the Insolvency and Bankruptcy Code (Second Amendment) Bill that aims to give more power to homebuyers by recognising them as financial creditors.
The Bill allows genuine promoters of micro, small and medium enterprises (MSMEs) to bid for their stressed firms and provides for the withdrawal of a case after admission by the adjudicating authority if it is approved by 90% of creditors.
The Bill, which was introduced in the Lok Sabha on July 23, is meant to replace an ordinance promulgated in June, once it gets Presidential nod after being cleared by both the Houses of Parliament.
The Bill also streamlines the ineligibility criteria under Section 29 A of the IBC by ensuring carve-outs for pure play financial entities like banks, to enable more players to participate in bidding for stressed assets. These financial entities would be exempted from the disqualification provision on account of holding stake in or acquiring stressed firms earlier.
“A resolution applicant holding an NPA by virtue of acquiring it in the past under the IBC, 2016, has been provided with a three-year cooling-off period, from the date of such acquisition. In other words, such NPA shall not disqualify the resolution application during…the three-year grace period,” the government had said earlier.
To encourage resolution rather than liquidation, the voting threshold for approving a resolution plan has been trimmed to 66% from 75% earlier. For routine decisions, the voting threshold is fixed at 51%.
The amendment Bill has been brought in Parliament, based on the recommendations of a panel, headed by corporate affairs secretary Injeti Srinivas. Introducing the Bill last week, finance and corporate affairs minister Piyush Goyal had said the Insolvency and Bankruptcy Code was initially introduced when the banking sector was going through a serious crisis because of indiscriminate lending between 2008 and 2014.