Lok Sabha amends bankruptcy law

Lok Sabha amends bankruptcy law

Context

Amendment made to Insolvency & bankruptcy law

What has been done?

The Lok Sabha has amended the Insolvency and Bankruptcy Code law to prevent wilful defaulters and existing promoters from taking part in insolvency proceedings of stressed assets of companies unless they make their bad loans operational by paying up interests 

Bill replaces the ordinance

The bill will replace an ordinance that was brought in November to prevent unscrupulous promoters from misusing the provisions of the Insolvency and Bankruptcy Code (IBC)

Finance minister’s views

IBC law has been learning process for the government as changes have had to be made to ensure that ineligible people don’t find loopholes to walk back into the companies against who insolvency proceedings were initiated 

Reactions: All bad loans not due to wilful default

Commenting on the changes to the IBC, tax experts said that while the intention of the government is good, all bad loans may not be the result of wilful default, diversion or misappropriation of funds.

• “In a market driven economy, failure can be for various reasons like change in market conditions, severe competition, change in technology, change in Government policies, stay by Supreme Court, bona fide management decisions (which later proved to be incorrect) and many others,”V.S. Datey of Taxmann, a consultancy service.