Introduction
On
25th July 2019 i.e. on last Thursday, Parliament passed the new
Insolvency and Bankruptcy (amendment) Bill, 2019. This is the third time this
unified code has been amended since its inception and it is very important to timely
update this code as the changing situations requires it to be. This 2019
Amendment has made eight significant changes in the Insolvency and Bankruptcy
Code, 2016, so that the code remains more vibrant and free from interpretative
ambiguities.
Salient Amendments
The
2019 Amendment has made eight significant changes so that the Code remains more
effective and efficient and is able to solve its real purpose and the
amendments are:-
(a) The
amendment clarifies the manner in which application can be withdrawn before
constitution of Committee of Creditors (COC).
(b) The
amendment states that while passing a resolution plan the COC may approve a
plan providing for their respective contribution in the liquidation process and
recommend sale of the business of the corporate debtor as a going concern, and
also decide the fees payable to the liquidator.
(c) The
amendment also provides that where the business of corporate debtor is sold,
the liquidation process shall be closed and no dissolution will take place.
(d) The
amendments also restrict the liquidation process to a time limit of 1 year from
the date of its commencement.
(e) The
amendments also provide that financial creditors, who are financial institutions,
shall contribute in the liquidation process if the corporate debtor doesn’t
have liquid assets.
(f) The
amendments states that there must be a Stakeholder’s Consultation Committee
constituting workmen, employees, government, secured and unsecured financial
creditors and other operational creditor to advice liquidator in the matters
related to sale.
(g) The
amendments require the stakeholder’s submission of claim on the liquidation
commencement date.
(h) The
amendment inserts compliance certificate to be submitted to the Adjudicating
Authority.
Implications
The
2019 Amendment in Insolvency and Bankruptcy Code, 2019 will make this unified
code more vibrant and effective as firstly it restrains the concerned
authorities to complete the liquidation process within a year from the date of
commencement, so the undue delay on the cost of creditors can be avoided.
Secondly, the amendment gives priority to the revival of the corporate debtors
and not on dissolution by selling the corporate debtors business. Lastly, the
amendment provides that the cost of liquidation must be contributed by the
creditors and for this COC must lay down a well defined plan which will give
relief to the corporate debtor and a chance of revival which is the main
objective of this code.
Conclusion
It
can be concluded that through timely introduction of necessary changes in this
code by Parliament the unified code is becoming more cohesive and efficient in
its implementation. This amendment is very important as the presiding
authorities in the liquidation matters are causing undue delay in timely
completion of the process and at the present time there are more than 335 cases
which have crossed the limit of 330 days as per the new amendment.
However,
the amendment will considered as effective only when at the time of its
implementation it will be free from any interpretation ambiguities and
absurdness.
Drafter by - Ashutosh Vasistha
Plagiarism Status – 0%
Approved by Adv. Jyotishwar Bhosale, for EXPERT JURIST LLP
