Wilful Defaulters Can't Bid For Assets Under Amended Insolvency Law

Wilful defaulters barred from bidding under insolvency law

Wilful defaulters barred from bidding under insolvency law

The cabinet had earlier asked banks to ensure that wilful defaulters were prevented from buying same stressed assets again as it strives to cut the record $ 147 billion soured loans accumulated in the banking sector, report added further. The SBI chairman's statement comes after the government amended the Insolvency and Bankruptcy Code to bar even ordinary defaulters from bidding for assets under the insolvency process. The Insolvency and Bankruptcy Board of India (IBBI) has also been given additional powers. The amendments to regulations (Regulation 37, 38 & 39) empower Committee of Creditor to carry out due diligence of resolution plan submitted with respect to the insolvency proceedings thereby bestowing them with the duty to assure that the most viable plan in the said regard is accepted. To this effect the focus is on getting a resolution plan that is credible.

These would help strengthen the formal economy and encourage honest businesses and budding entrepreneurs to work in a trustworthy, predictable regulatory environment, it said.

By virtue of this, amendments can be made to sections 2, 5, 25, 30, 35 and 240 of the Code, and insert new sections 29A and 235A in the Code.

The Code that came into effect from December a year ago, allows a market-determined and time-bound insolvency resolution process under the eyes of the Corporate Affairs Ministry.

Persons who will be promoters or in management or control of the business of the corporate debtor during the implementation of the resolution plan and holding companies, subsidiary companies, associate companies and related parties of persons. The new amendment states that those who have their accounts classified as non-performing assets for one year or more and are unable to settle their overdue amounts submission of the resolution plan, can not bid.

It can be said that before the approval of the resolution plan which states how it has dealt with the interests of all stakeholders of the Corporate Debtor, the resolution applicants and connected persons will now be put under a strict test for ensuring their credit worthiness and credibility.

The introduction of firm surveillance prior to according consent to the resolution plans submitted by the resolution applicants aims to ensure that only suitably best plans are approved which do not lead to liquidation, post resolution are prevented.

The punishment is fine which shall not be less than one lakh rupees but which may extend to two crore rupees.

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