Finance Minister Arun Jaitley on Tuesday said the government has entered into an unchartered territory as far as bankruptcy and insolvency Code is concerned and would continue to modify the law dealing with the issue.
"Insolvency and bankruptcy is an area in which it is only in the recent years that we have chartered into. It is a learning experience," the Minister said while winding up a debate on the Insolvency and Bankruptcy Code Amendment Bill, which was later approved by the Rajya Sabha through a voice vote.
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 Bill was passed by the Lok Sabha last week.
The government, Jaitley said, has been encountering situations which were not anticipated earlier and assured the House that it would continue to take corrective action.
The bill seeks to replace an ordinance, which was promulgated in November to prevent unscrupulous persons from misusing or vitiating the provisions of the Insolvency and Bankruptcy Code (IBC).
The ineligible persons or entities will include undischarged insolvent, wilful defaulter and those whose accounts have been classified as non-performing asset.
These persons, however, can become "eligible to submit a resolution plan" if they clear all the overdue amounts with interest and other charges relating to their NPA accounts.
Those defaulters who had participated in the insolvency proceedings before November 23 can also bid for stressed assets provided they clear their dues in a month.
Responding to the concerns of the members, he said the whole effort was to make banking sector robust and detach it from politics.
"You need a strong banking system ...You need banks which are able to lend money to large industries, to infrastrucute projects, to small industry, for educational loans. ...It is all part of the economy that you need a robust banking system," he said.
Jaitley said during the insolvency process, banks and unsecured creditors will have to take some haircut and if the same management comes back, nothing would change.
The objective of the bill is to allow creditors to move to the National Company Law Tribunal (NCLT) in case of insolvency.
"We have now started that resoltuion process ...There are several hundereds of them and almost more than 500 have been disposed of. Creditors are using these procedures," the Minister said.
He said large pending cases are broadly in two categories - one with large assets, functional plants and factories and the other are either trading companies or EPC companies with little assets.
Jaitley said as far as asset-owning companies are concerned, fetching the best prices 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.
Former Finance Minister and Congress leader P Chidambaram while initiating the debate on the bill supported it but pointed to various clauses which according to him would deter Indian companies from participating in the process.
"I think one should have been a little more rigorous in the exclusion clauses. One should have kept exclusion to a very, very small number which definitely must be excluded. But I am afraid by making the clauses so broad, so over-inclusive, practically everybody in the financial world is likely to be excluded," Chidambaram said.
He said a major concern was lack of a bidder for a company as a 'going concern'.
BJP's Bhupender Yadav while supprting the bill said over 500 aplications for insolvency have been filed with the NCLT.
A Navaneethakrishnan of AIDMK supported the bill, saying agri loans and educational loans should be excluded from the purview of NPAs. Sukhendu Shekhar Roy (TMC) said there was a need to identify willful defaulters of bad loans.
Attacking the government for being non-serious on recovery of non-performing assets (NPAs) that are estimated to have touched Rs 10 lakh crore, D Raja (CPI) sought to know "why the government is afraid of corporate companies" and not publishing the names of defaulters.
Jairam Ramesh (Cong) raised concern about lenders taking "big haircuts" or discounts on claim value of NPAs and asked if this is going to be a "norm".