The Union Cabinet on Wednesday recommended an ordinance to amend the Insolvency and Bankruptcy Code, The Indian Express reported.
The amendment will bar wilful defaulters from submitting a resolution plan for companies that are going through the corporate insolvency resolution process. “Persons who have indulged in preferential transaction, undervalued transaction, fraudulent transactions or who have been disqualified by the government to be a director in a company cannot be resolution applicants,” an official said.
The report, citing sources, said that the ordinance was being sent to the President and his approval was expected soon. It is likely be tabled in the Winter Session of the Parliament.
The ordinance also proposes to not allow the sale of property to a person who is disqualified to be a resolution applicant.
Union Finance Minister Arun Jaitley confirmed that changes have been proposed to the Insolvency and Bankruptcy Code. “Since this is being done by an ordinance, till it is approved, as a matter of propriety, we don’t give details,” he was quoted as saying by The Hindu.
An official said that the government wants to ensure that promoters of defaulting firms are prevented from bidding for businesses that they ran to the ground in the first place. “If as part of the insolvency process, the bank takes a 40% haircut on its exposure to a particular business, the same promoter is then able to make a bid for the business, then the only loser in the process is the banker,” the official said. “Why should such a system be perpetuated?”
Limited-time offer: Big stories, small price. Keep independent media alive. Become a Scroll member today!
Our journalism is for everyone. But you can get special privileges by buying an annual Scroll Membership. Sign up today!