The Ministry of Corporate Affairs had notified the Insolvency and Bankruptcy Code (Amendment) Act, 2019 dated 06.08.2019. The government introduced the Insolvency and Bankruptcy Code (Amendment) Bill, 2019, in the Rajya Sabha on 24th July 2019, seeking to restrict the duration of the resolution process and ensure the primacy of financial creditors in case of recoveries. After A Week of passing the bill by Rajya sabha. The Bill was also passed by the Lok Sabha after a nearly three-hour-long discussion on the amendments.
This was the third time the government has brought in amendments to the IBC since its enactment into law in 2016.
Under the Code, a financial creditor may file an application before the National Company Law Tribunal (NCLT) for initiating the insolvency resolution process. The NCLT must find the existence of default within 14 days. Thereafter, a Committee of Creditors (CoC) consisting of financial creditors will be constituted for taking decisions regarding insolvency resolution. The CoC may either decide to restructure the debtor’s debt by preparing a resolution plan or liquidate the debtor’s assets.
Among other things, the Bill seeks to ensure timely admission of insolvency cases and completion within the newly set deadline of 330 days (it was 270 days earlier). The resolution plan under the corporate insolvency resolution process will also be binding on the Centre, State, and local authorities.
Further, the Bill states that this provision would also apply to insolvency processes:
(i) that have not been approved or rejected by the National Company Law Tribunal (NCLT),
(ii) that have been appealed to the National Company Appellate Tribunal or Supreme Court, and (iii) where legal proceedings have been initiated in any court against the decision of the NCLT.
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