Corporate houses with deep pockets can bid for multiple distressed assets under the insolvency process without getting themselves disqualified under Section 29A of the Insolvency and Bankruptcy Code (IBC).
This is provided in the IBC (Second Amendment) Bill, 2018 — tabled in the Lok Sabha on Monday — in the form of a carve-out to the much-talked-about Section 29A, which specifies the parties ineligible to be a resolution applicant.
Under the new Bill, Section 29A will not apply to a resolution applicant holding a non-performing asset (NPA) account due to the acquisition of a distressed asset with a non-performing account for three years from the date of such acquisition. This will ensure that corporates that have already bought a distressed asset are not prohibited from bidding for more such assets.
The Bill also offers a disqualification breather to financial entities holding NPAs: they, too, will be exempted from Section 29A.
Interim Finance Minister Piyush Goyal introduced the Bill today in the Lok Sabha, after the Cabinet, on July 18, gave its consent for a Bill to replace the June 6 insolvency ordinance.
The June 6 ordinance — IBC (Amendment) Ordinance 2018 — was the second one issued by the government to make changes in the IBC, which was enacted in 2016.
The Bill treats home buyers as “financial creditors”, giving them a better say in the resolution plan of developers. Any amount raised from an allottee of a real estate project will be deemed to be an amount having the commercial effect of debt (borrowing). The Bill has also defined the expressions “allottee” and “real estate project”.
Further, the Bill allows the promoters of MSMEs to bid for their companies in any insolvency process. It also empowers the Centre, in public interest, to exempt MSMEs from the application of any other provisions of the Code.
The Bill provides for the insertion of a new section — Section 12A — to permit the withdrawal of application admitted for initiation of insolvency resolution process. The application can be made only with the approval of 90 per cent of voting share of the committee of directors.
The Bill also provides for the lowering of the voting threshold for various decisions of the committee of creditors to 66 per cent for important decisions and 51 per cent for routine decisions.
The Insolvency and Bankruptcy Board of India’s (IBBI) will be given a “developmental” role similar to other regulators such as IRDAI and PFRDA. It will also be given the power to regulate the working and practices of certain professionals under the IBC.
The Bill further provides that the Limitation Act 1963 will apply to the proceedings or appeals under the IBC.