NEW DELHI: The Rajya Sabha on Saturday passed amendments to the insolvency law for suspension of fresh insolvency proceedings for at least six months starting March 25 amid the Covid pandemic, with Finance Minister Nirmala Sitharaman saying a decision on extending the suspension of relevant provisions will be taken next week.
In the wake of the Covid-19 situation, the government decided to suspend the provisions starting from March 25 for six months by promulgating an ordinance in June.
Default on repayments from March 25, the day when the nationwide lockdown began to curb the Covid infection, would not be considered for initiating insolvency proceedings for at least six months. The six-month period is ending next week. The Insolvency and Bankruptcy Code (Second Amendment) Bill (IBC), 2020, seeks to replace the ordinance issued in June, was passed by a voice vote after a brief discussion. Replying to the debate, Finance and Corporate Affairs Minister Nirmala Sitharaman said the suspension of provisions will end next week.
“At the moment, amendment to the code gives me a provision to only extend till one year. If at all, because it is coming to an end on September 25 this year, September 24 itself we have to make an announcement about what is going to happen. But even if I do, it means by March it should be ending…,” the minister said. The minister also clarified that insolvency proceedings against corporates defaulting on loans prior to March 25 will continue and the amendment will not stall those cases. A majority of opposition parties supported the bill and also urged the government to provide interest waiver on loans to farmers and poor people suffering due to the Covid-19 crisis.
During the debate on the Bill, many members expressed fears over its possible misuse by corporates even as they hoped that it will help in reviving the economy. On the members’ queries regarding liability of personal guarantors in the IBC, Sitharaman said the corporate debtor often has guarantors.
“So, for comprehensive corporate insolvency resolution and liquidation we felt it was necessary that the insolvency of the corporate debtor as well as its guarantors are considered together to whatever extent it is possible,” Sitharaman said.
On queries about the urgency to bring the ordinance in the first place, Sitharaman said that “between sessions if there is a need for ordinance because the ground situation demands it, I would think a responsive government’s duty is to at least use the ordinance to show that we are there with the people of India.” “So to that extent, I am sure the House will appreciate that as and when the government decides for ordinance it is because of that, and whenever the next session happens we come back,” she said.