Bankruptcy code Bill gets Rajya Sabha’s green signal

The Rajya Sabha unanimously passed the Insolvency and Bankruptcy Code (Amendment) Bill on Tuesday that replaces an Ordinance that prevents “unscrupulous persons from misusing or vitiating the provisions of the Insolvency and Bankruptcy Code”.

Replying to the two-hour-long debate on the Bill, Finance Minister Arun Jaitley said the recent experience with loans has given a big lesson to the banking system in the country.

“Did banks think at the time of giving loans without any security like in case of trading companies, how much haircut they would have to take if those companies went to insolvency?” he asked.

He said insolvency and bankruptcy is an area that the country has only recently entered. “It is a learning experience,” he said and added that the Centre has been encountering situations which were not anticipated earlier and assured the Upper House that it would continue to take corrective action.

“You need a strong banking system ...You need banks which are able to lend money to large industries, to infrastructure projects, to small industry, for educational loans... It is all part of the economy that you need a robust banking system,” he said and added that as far as asset-owning companies are concerned, fetching the best price is the target and any bid which is not viable can be rejected.

“It is for creditors to decide how much haircuts they want,” he said.

Earlier, initiating the debate, former Finance Minister P Chidambaram said there will be consequences for the provisions of “over-exclusion” in the Bill.

He said very few people in India will be eligible to bid in case a stressed asset is put on sale because of the provision.

“It is quite possible that asset-reconstruction companies and alternate investment bodies registered abroad will turn out to be the bidders. Most Indian companies, which go through a resolution process, will pass from the hands of an Indian management to a foreign management,” he said.

He said a level-playing field should have been created for an adequate number of Indian companies and investors to bid for these assets rather than excluding them by a very over-inclusive Ordinance which will keep out a large number of potential Indian investors.

CPI leader D Raja said the RBI has asked the banks to be ready for ‘deep haircut’.

“According to common people, ‘deep haircut’ means write-off huge loans of big corporate companies. That is what the people understand. You write-off big loans of big corporate companies. How long this appeasement to corporate houses can go on in this country? Every government talks big, big things. But, finally, are you in a position to take tough action against these corporate companies which are wilful defaulters?” he asked.

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