Reacting to the death of Café Coffee Day founder V G Siddhartha, Finance Minister Nirmala Sitharaman said business failures should not be a taboo.
Responding to the debate on the amendments to the Insolvency and Bankruptcy Code (IBC) in Lok Sabha on Thursday, Sitharaman said, “Business failures in this country should not be a taboo, or looked down upon. On the contrary, we should give an honourable exit or resolution to the problem in letter and spirit of the IBC.”
In the letter, purportedly written by Siddhartha, there was mention of harassment by the Income Tax Department. The I-T department has denied the charges.
Telugu Desam Party MP Jayadev Galla said businesses may fail because of economic downturn or business cycle. Galla also said that accountability of banks need to come under scrutiny. “Signing of personal guarantee (by industrialist to take loan) is leading to (them) taking an extreme action like suicide,” he said.
Biju Janata Dal MP Pinaki Misra referred to the death of the coffee tycoon, saying it is unfortunate that the insolvency law “should continuosly continue to grow and expand in our country”. He said it does not bode well for the country because “that is not how you reach the $5-trillion mark”.
On issues concerning Jet Airways, Sitharaman said the stakeholders were free to work out a resolution plan and they were not obliged to use the IBC, which is optional.
Later, Parliament approved changes in IBC, providing greater clarity over distribution of proceeds of auction of loan-defaulting companies.
The amendments give creditors to a loan-defaulting company explicit authority over the distribution of proceeds and fix a timeline of 330 days for resolving cases under IBC, including time taken for litigation.
The amendments, Nirmala said, would also bring in more clarity on various provisions, including time-bound disposal at the application stage for resolution plan and treatment of financial creditors.
Among others, the approved resolution plan would be binding on Central and state governments as well as statutory authorities.
Sitharaman said the proposed amendments also respond to issues of financial creditors in the wake of a recent ruling with respect to financial and operational creditors.
Recently, the National Company Law Appellate Tribunal (NCLAT) had ruled in the Essar Steel's case that the committee of creditors (CoC) had no role in distribution of claims and brought lenders (financial creditors) and vendors (operational creditors) on a par. Sitharaman quoted a Supreme Court judgment to say that with implementation of the IBC, a defaulter's paradise no longer exits.
Referring to the issue of homebuyers, raised by some Opposition members, Sitharaman said the provisions of the Bill strengthen the hands of homebuyers and the government would endeavour to do full justice to them.
The government, she said, was also looking at ways to resolve the issue concerning buyers of flat from JP Group companies. She said the issue of inclusion of cross- border insolvency under the IBC was under examination and the government would take a view after consulting stakeholders.