President Ram Nath Kovind on Thursday gave his assent to an ordinance to amend the Insolvency and Bankruptcy Code, 2016, and make it stronger. Finance Minister Arun Jaitley said the changes were designed to prevent wilful defaulters from bidding for stressed assets. It also gives the Insolvency and Bankruptcy Board of India additional powers.
The code provides for an effective and robust legal framework to resolve insolvency cases and release non-performing assets quickly. The ordinance amends sections 2, 5, 30, 35 and 240 of the code and adds two new sections – 29A and 235A. It will be presented in the Winter Session of Parliament.
“The ordinance aims at putting in place safeguards to prevent unscrupulous, undesirable persons from misusing or vitiating the provisions of the code,” the Finance Ministry said. “The amendments aim to keep out such persons who have wilfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to the successful resolution of insolvency of a company.”
The amendment also proposes steps, such as stricter action against defaulting companies, and place reforms in the banking sector to strengthen the “formal economy and encourage honest businesses and budding entrepreneurs to work in a trustworthy, predictable regulatory environment”.
An ordinance with the president’s assent has the same effect as an act of Parliament. But it will expire if Parliament does not approve of it within six weeks reassembly.