The Union Cabinet today approved steps that will protect the debtors and the companies undergoing bankruptcy proceedings against actions of investigating agencies. It approved changes to the Insolvency and Bankruptcy Code, 2016 (IBC) to bar investigating agencies from attaching properties of companies undergoing bankruptcy.
The proposed changes, to be approved by the Parliament, will give confidence to prospective bidders of such companies that their interests will be protected and that the new owners would not be harassed by the probing agencies for actions of former promoters of the firm.
The debtor, undergoing insolvency proceedings, will be allowed to continue as a going concern. Its licenses, permits, concessions, clearances etc cannot be terminated or suspended or not renewed during the moratorium period, a government release said.
The amendments also make it difficult for small creditors to drag companies to courts over small delays or over non-payment of small amounts. This will prevent unnecessary clogging of the bankruptcy courts.
IBC, touted as one of the most far reaching Acts approved and implement by the first Narendra Modi government, has been held back by vested interests, promoters refusing to give up control of their companies, small operational creditors playing against financial creditors.
A recent case where bidders of a bankrupt company were left wary involved attachment of Bhushan Power & Steel’s (BPSL’s) assets by the Enforcement Directorate (ED). The attachment by the ED was made under Prevention of Money Laundering Act (PMLA) and is being legally tested at the National Company Law Appellate Tribunal (NCLAT). This happened when the resolution was in the final stage of resolution under IBC. Sajjan Jindal-promoted JSW Steel had bagged BPSL under a bidding process.