President Ram Nath Kovind on Thursday gave his consent to the Ordinance approved by the Cabinet of the Union to amend the Insolvency and Bankruptcy Code (IBC) to strengthen the regime.
The purpose of the Ordinance is to establish safeguards by prohibiting voluntary defaulters, those badociated with unproductive badets (NPA), and those who do not usually comply, to regain control of the defaulted company or stressed badets through the back door in the attire to be a "resolution applicant".
"The sale of property to a person who is not eligible to be a resolution applicant … has been prohibited," an official statement said. Significantly, the amendments also stipulate a fine of ₹ 1 lakh to ₹ 2 crore for those who violate these rules.
According to the statement, a new section has been introduced in the IBC that makes certain people ineligible to be a "resolution applicant". Those who become ineligible include "intentional defaulters, those who have their accounts clbadified as NPAs for a year or more and can not liquidate their past due amounts include interest on it."
Ineligible persons also include those who have executed an enforceable collateral in favor of a creditor, with respect to a corporate debtor subject to a Corporate Insolvency Resolution Process or liquidation process under the IBC. Those who are promoters or in the control of the resolution applicant are also ineligible, or they will be promoters or in the control of the corporate debtor during the implementation of the resolution plan, the holding company, subsidiary, badociate or related party of the people mentioned above, said the statement.
To ensure that the rules are effectively enforced, a new section "provides for punishment … (which) is fine, which shall not be less than ₹ 1 lakh, but may be extended to ₹ 2 crore."
The Ordinance aims to establish safeguards to prevent unscrupulous and undesirable people from misusing the IBC, the statement said. Actions against unfulfilled companies to avoid misuse of corporate structures for the diversion of funds, as well as eliminating unscrupulous elements of the resolution process "would help strengthen the formal economy and encourage honest businesses and budding entrepreneurs to work in a regulatory environment reliable and predictable, "he added.
In addition to imposing restrictions for these people to participate in the resolution or liquidation process, the amendment also provides such verification by specifying that the Creditors Committee (CoC) must guarantee the viability and viability of the resolution plan before approving it. . The Insolvency and Bankruptcy Council of India (IBBI) has also received additional powers.
The IBBI regulations have also recently been modified to ensure that information on the applicant's background that presents the resolution plan along with information on preferential, undervalued or fraudulent transactions are placed with the CoC to make an informed decision about the matter, according to the statement.
It has also been specifically stipulated that CoC will reject a resolution plan, which is submitted before the commencement of the Ordinance but has not yet been approved, and where the resolution applicant is not eligible under the new regulations. "In such cases, because of the rejection, where there is no other plan available with the CoC, you can invite new resolution plans," the statement said.