The Lok Sabha on Monday passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020, to ensure that fresh insolvency proceedings will not be initiated against stressed companies for at least six months starting March 25 amid the coronavirus pandemic, PTI reported. The Rajya Sabha had passed the bill on September 19.
Finance Minister Nirmala Sitharaman said the provisions will not impact insolvency proceedings initiated before March 25, when nationwide lockdown was imposed to rein in the pandemic. “We have to prevent companies facing distress on account of [the] pandemic from being pushed into insolvency,” she said. “Many other countries have extended support to the companies to help them come out of the current crisis.”
The finance minister said the changes in Sections 7, 9 and 10 of the IBC would provide relief to companies affected due to the pandemic. These sections deal with initiation of corporate insolvency resolution process by financial creditor, operational creditor and corporate debtor.
Sitharaman told the Lok Sabha that the priority is to keep the company as a going concern rather than to liquidate them. She also informed the members that 258 companies were saved from going bankrupt through the IBC process, while 965 firms went for liquidation. According to the minister, 258 companies rescued had assets worth Rs 96,000 crore and the 965 companies sent for liquidation had assets of Rs 38,000 crore.
Meanwhile, Congress member Manish Tewari said the Indian economy was in distress even before the pandemic began. He urged the government to focus on demand-side initiatives by extending monetary help to the poor instead of focusing on supply measures.
The bill, which replaces an ordinance passed in June, was later approved by the Lok Sabha.