Deepali Kalia-
On 28th July, the Lok Sabha passed the Insolvency and Bankruptcy Code (IBC)(Amendment) Bill, 2021 despite protests from the opposition.
On 26th July, the Bill was introduced in the house and due to disruptions caused by the protests of the opposition, it was passed without any discussion.
The Government stated that the COVID-19 pandemic has had a negative impact on businesses, especially those in the Micro, Small, and Medium Enterprises (MSME) sector.
The Bill, therefore, provides a pre-packaged insolvency resolution process for corporate debtors under the MSME Development Act, 2006.
“This will ensure Quicker, cost-effective and value maximizing outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of their businesses and which preserves jobs”, the Government informed.
The IBC Amendment Ordinance which was announced on April 4, 2021, by the President will be replaced by the said Bill.
As per the Statement of Objects and Reasons of the Bill, the MSME sector is very crucial to the country’s economy as it contributes significantly to the nation’s Gross Domestic Product (GDP) and generates employment for many.
The Bill has sought the addition of a new chapter III-A comprising of sections 54A to 54P in the code, to facilitate the pre-packaged insolvency resolution process for corporate persons that are MSMEs.
The Bill as per the Statement of Objects and Reasons has sought to specify a minimum threshold of not more than Rs 1 crore for initiating the pre-packaged insolvency resolution process.
Provisions with regard to disposal of simultaneous applications for initiation of the insolvency resolution process and pre-packaged insolvency resolution process that are pending against the same corporate debtor are also provided by the Bill.
The penalty has been provided by the Bill for malicious or fraudulent initiation of pre-packaged insolvency resolution process or with the intention to defraud persons, and also for fraudulent management of the corporate debtor at the time of the process.
The Bill also provides for punishment for various offences related to pre-packaged insolvency resolution process.
Copy of the Bill: Insolvency and Bankruptcy Code (Amendment) Bill, 2021
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