Parliament approved changes in the Insolvency and Bankruptcy Code (IBC), providing greater clarity over the distribution of proceeds of the auction of loan defaulting companies, with the Lok Sabha passing the Bill with voice vote. Seven sections of the code are being amended. The Bill was passed by Rajya Sabha. The Insolvency and Bankruptcy Code (Amendment) Bill, 2019, gives the committee of creditors of a loan defaulting company explicit authority over the distribution of proceeds in the resolution process, and fixes a firm timeline of 330 days for resolving cases referred to the IBC.
 
 
What
  1. The amendments would also bring in more clarity on various provisions, including the time-bound disposal for resolution plan at the application stage, as well as the treatment of financial creditors.
  2. Once the Corporate Insolvency Resolution Process (CIRP) begins, it has to be completed in 330 days, including litigation stages and judicial process.
  3. The approved resolution plan would be binding on Central and state governments as well as various statutory authorities.
  4. The proposed amendments also respond to issues pertaining to financial creditors in the wake of a recent ruling with respect to financial and operational creditors.
  5. Recently, the National Company Law Appellate Tribunal (NCLAT) had ruled in the Essar Steel Ltd’s case that the Committee of Creditors (CoC) had no role in the distribution of claims, and brought lenders (financial creditors) and vendors (operational creditors) on par. The provisions of the Bill empower home buyers
  6. The government will endeavour to do full justice to them, adding that the government was also looking at ways to resolve the issue concerning buyers of flats from JP Group of companies.
About NCLAT
  1. National Company Law Appellate Tribunal (NCLAT) was constituted under Section 410 of the Companies Act, 2013 for hearing appeals against the orders of National Company Law Tribunal(s) (NCLT), with effect from 1st June, 2016.
  2. NCLAT is also the Appellate Tribunal for hearing appeals against the orders passed by NCLT(s) under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), with effect from 1st December, 2016. 
  3. NCLAT is also the Appellate Tribunal for hearing appeals against the orders passed by Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC.

 

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