Insolvency code: Govt to ask panel to review amendments

MUMBAI: The government has decided to ask a panel it formed in November to review provisions of the Insolvency & Bankruptcy Code (IBC) to also review a later amendment prohibiting defaulting promoters and related entities from bidding for their assets, two people aware of the matter said. The committee chaired by secretary, Ministry of Corporate Affairs (MCA), also includes members involved in the drafting of IBC, met on Friday.

Coincidentally, the Punjab and Haryana High Court on Friday issued a notice to the centre over the amendment. Suman Jolly, managing director of Punjab-based Recorders and Medicare Systems Pvt. Ltd had challenged the ordinance on the ground it would have retroactive effect, and that it does not distinguish between ordinary and wilful defaulters. The court will hear the matter on 25 January.

“The panel will help the government in relooking at some of the issues in the ordinance which have been highlighted by the industry,” said the first of the two persons cited above.

An email sent to MCA on Monday was not answered till press time.

This comes at a time when industry experts had expressed concerns that the ordinance may shut out even clean bidders from acquiring stressed assets.

“There is little bit of interpretation issue on the drafting of the ordinance which I think the government is proactive enough to seek a feedback and tweak it,” Manish Aggarwal, partner and head - resolutions, special situations group, KPMG India, told Mint at a recent event.

The ordinance bars not only wilful defaulters, but also several other categories such as guarantors to the debtor, those with loans classified as non-performing assets (NPAS) for at least a year, those convicted for any offence with a prison term of more than two years, directors in companies that are disqualified, entities barred by the capital markets regulator, those who have been found to have struck fraudulent transactions with the firm, and connected entities.