Wilful defaulters can’t bid for stressed assets

Tribune News Service

New Delhi, November 23

Putting in place safeguards to debar promoters who are wilful defaulters and those associated with non-performing assets (NPAs) from bidding for stressed assets, the government today promulgated an ordinance to amend the Insolvency and Bankruptcy Code (IBC).

The amendment is aimed at keeping out promoters of companies which are under insolvency proceedings to make a bid for them at much cheaper prices. Forensic audits have been undertaken by the banks to identify wilful defaulters or those who have siphoned off funds from the defaulting company.

Earlier, President Ram Nath Kovind had given his assent to the ordinance to amend the IBC. The ordinance was cleared by the Union Cabinet yesterday and will be taken up in the forthcoming session of Parliament.

The Corporate Affairs Ministry said the ordinance aims at putting in place safeguards to prevent unscrupulous, undesirable persons from misusing or vitiating the provisions of the Code.

The amendment makes certain categories of promoters ineligible to be a bidder or a resolution applicant under the insolvency proceedings.

These include wilful defaulters and those who have their accounts classified as NPAs for one year or more and are unable to settle their overdue amounts including interest.

The ineligible category also includes those who have executed an enforceable guarantee in favour of a creditor, in respect of a corporate debtor undergoing a corporate insolvency resolution process or liquidation process under the code.

It has been clarified that any plan submitted before the promulgation of the ordinance is to be rejected if the bidders are found to be ineligible under the amended norms.

In addition to putting in place restrictions for promoters to participate in the liquidation process, the amendment also provides checks by specifying that the Committee of Creditors ensure the viability and feasibility of the resolution plan before approving it. The Insolvency and Bankruptcy Board of India (IBBI) has also been given additional powers.

New amendments 

• The amendment is aimed at keeping out promoters of companies which are under insolvency proceedings to make a bid for them at much cheaper prices
• The amendment makes certain categories of promoters ineligible to be a bidder or a resolution applicant under the insolvency proceedings
• Any plan submitted before the promulgation of the ordinance will be rejected if the bidders are found to be ineligible under the amended norms