Topics Covered: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
IBC Bill discriminates against homebuyers
What to study?
For Prelims: Overview and key provisions in the Bill.
For Mains: Significance of the Bill, issues involved, ways to address them.
Context: The report on the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 was tabled by the Standing Committee on Finance in Parliament recently. Three committee members said the IBC Bill was discriminatory as it does not treat homebuyers on a par with other financial creditors and violates a Supreme Court ruling,
What’s the issue?
The Bill has introduced a new clause that sets a threshold of 100 homebuyers, or 10% of the buyers, in a residential project, whichever is less, as a requirement to jointly take the developer to an insolvency court. This means that an individual homebuyer, who is a financial creditor, cannot file an insolvency application.
Key Highlights Of Insolvency And Bankruptcy (Second Amendment) Bill, 2019:
- Section 11 of the Code has been amended to clarify that a corporate debtor shall not be prevented from initiating CIRP against any other corporate debtor.
- Section 16 of the Code has been amended to provide that an insolvency resolution professional should be appointed on the date of admission of the application for initiation of Corporate Insolvency Resolution Process (CIRP).
- Section 23 of the Code has been amended to enable the resolution professional to manage the affairs of the corporate debtor during interim period between the expiry of CIRP till the appointment of a liquidator;
- A new Section 23A has been inserted to provide that the liability of a corporate debtor for an offence committed prior to the commencement of the CIRP shall cease under certain circumstances.
Effects of the amendment:
The amendment brings the much awaited changes needed in the insolvency sector. It clears the air on various aspects and provides relief to both corporate debtor as well as the creditors. The thresholds introduce will prevent admission of unnecessary cases to the insolvency court. However, even after anticipation, cross border insolvency framework has not been included in the amendment. Now, the same is expected to get cleared in the next session.
- Concentrate on key provisions.
- Compare with the previous draft and look for key changes made.
- Understand the insolvency process.
Discuss the significance the Insolvency And Bankruptcy (Second Amendment) Bill, 2019. What are the issues associated?
Sources: the Hindu.