Bill was introduced in Rajya Sabha on 24th July, 2019

jftLVªh lañ Mhñ ,yñ—(,u)04@0007@2003—19 REGISTERED NO. DL—(N)04/0007/2003—19 vlk/kkj.k EXTRAORDINARY Hkkx II — [k.M 2 PART II — Section 2 izkf/kdkj ls izdkf'kr PUBLISHED BY AUTHORITY lañ 30] ubZ fnYyh] cq/kokj] tqykbZ 24] 2019@Jko.k 2] 1941 ¼'kd½ No. 30] NEW DELHI, WEDNESDAY, JULY 24, 2019/SHRAVANA 2, 1941 (SAKA) bl Hkkx esa fHkUu i`"B la[;k nh tkrh gS ftlls fd ;g vyx ladyu ds :i esa j[kk tk ldsA Separate paging is given to this Part in order that it may be filed as a separate compilation. RAJYA SABHA —————— The following Bill was introduced in the Rajya Sabha on the 24th July, 2019:— BILL NO. XXVI OF 2019 BILL NO. XXVI OF 2019 A Bill further to amend the Insolvency and Bankruptcy Code, 2016. BE it enacted by Parliament in the Seventieth Year of the Republic of India as follows:— 1. (1) This Act may be called the Insolvency and Bankruptcy Code (Amendment) Short title and Act, 2019. commencement. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. 31 of 2016. 2. In section 5 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as Amendment the principal Act), in clause (26), the following Explanation shall be inserted, namely:–– of section 5. “Explanation.–– For the removal of doubts, it is hereby clarified that a resolution plan may include provisions for the restructuring of the corporate debtor, including by way of merger, amalgamation and demerger;”.2 THE GAZETTE OF INDIA EXTRAORDINARY [PART II— Amendment 3. In section 7 of the principal Act, in sub-section (4), the following proviso shall be of section 7. inserted, namely:–– “Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub-section (5) within such time, it shall record its reasons in writing for the same.”. Amendment 4. In section 12 of the principal Act, in sub-section (3), after the proviso, the following of section 12. provisos shall be inserted, namely:–– “Provided further that the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor: Provided also that where the insolvency resolution process of a corporate debtor is pending and has not been completed within the period referred to in the second proviso, such resolution process shall be completed within a period of ninety days from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019.”. Amendment 5. In section 25A of the principal Act, after sub-section (3), the following sub-section of section shall be inserted, namely:–– 25A. “(3A) Notwithstanding anything to the contrary contained in sub-section (3), the authorised representative under sub-section (6A) of section 21 shall cast his vote on behalf of all the financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote: Provided that for a vote to be cast in respect of an application under section 12A, the authorised representative shall cast his vote in accordance with the provisions of sub-section (3).”. Amendment 6. In section 30 of the principal Act,–– of section 30. (a) in sub-section (2), for clause (b), the following shall be substituted, namely:— “(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than–– (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor. Explanation 1.–– For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2.–– For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor––SEC. 2] THE GAZETTE OF INDIA EXTRAORDINARY 3 (i) where a resolution plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;”; (b) in sub-section (4), after the words “feasibility and viability,”, the words, brackets and figures “the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor” shall be inserted. 7. In section 31 of the principal Act, in sub-section (1), after the words “members, Amendment creditors,”, the words “including the Central Government, any State Government or any of section 31. local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,” shall be inserted. 8. In section 33 of the principal Act, in sub-section (2), the following Explanation Amendment shall be inserted, namely:–– of section 33. “Explanation.–– For the purposes of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.”. 9. In section 240 of the principal Act, in sub-section (2), in clause (w), for the words Amendment “repayment of debts of operational creditors”, the words “payment of debts” shall be of section 240. substituted.4 THE GAZETTE OF INDIA EXTRAORDINARY [PART II— STATEMENT OF OBJECTS AND REASONS The Insolvency and Bankruptcy Code, 2016 (the Code) was enacted with a view to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order or priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India. 2. The Preamble to the Code lays down the objects of the Code to include “the insolvency resolution” in a time bound manner for maximisation of value of assets in order to balance the interests of all the stakeholders. Concerns have been raised that in some cases extensive litigation is causing undue delays, which may hamper the value maximisation. There is a need to ensure that all creditors are treated fairly, without unduly burdening the Adjudicating Authority whose role is to ensure that the resolution plan complies with the provisions of the Code. Various stakeholders have suggested that if the creditors were treated on an equal footing, when they have different pre-insolvency entitlements, it would adversely impact the cost and availability of credit. Further, views have also been obtained so as to bring clarity on the voting pattern of financial creditors represented by the authorised representative. 3. In view of the aforesaid difficulties and in order to fill the critical gaps in the corporate insolvency framework, it has become necessary to amend certain provisions of the Insolvency and Bankruptcy Code.The Insolvency and Bankruptcy Code (Amendment) Bill, 2019, inter alia, provides for the following, namely:– (a) to amend clause (26) of section 5 of the Code so as to insert an Explanation in the definition of “resolution plan” to clarify that a resolution plan proposing the insolvency resolution of corporate debtor as a going concern may include the provisions for corporate restructuring, including by way of merger, amalgamation and demerger to enable the market to come up with dynamic resolution plans in the interest of value maximisation; (b) to amend sub-section (4) of section 7 of the Code to provide that if an application has not been admitted or rejected within fourteen days by the Adjudicating Authority, it shall provide the reasons in writing for the same; (c) to amend sub-section (3) of section12 of the Code to mandate that the insolvency resolution process of a corporate debtor shall not extend beyond three hundred and thirty days from the insolvency commencement date, which will include the time taken in legal proceedings, in order to prevent undue delays in the completion of the Corporate Insolvency Resolution Process. However, if the process, including time taken in legal proceedings, is not completed within the said period of three hundred and thirty days, an order requiring the corporate debtor to be liquidated under clause (a) of sub-section (1) of section 33 shall be passed. It is clarified that the time taken for the completion of the corporate insolvency resolution process shall include the time taken in legal proceedings; (d) to insert sub-section (3A) in section 25A of the Code to provide that an authorised representative under sub-section (6A) of section 21 will cast the vote for all financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote, in order to facilitate decision making in the committee of creditors, especially when financial creditors are large and heterogeneous group;SEC. 2] THE GAZETTE OF INDIA EXTRAORDINARY 5 (e) to amend sub-section (2) of section 30 of the Code to provide that– (i) the operational creditors shall receive an amount that is not less than the liquidation value of their debt or the amount that would have been received if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priorities in section 53 of the Code, whichever is higher; (ii) the financial creditors who do not vote in favour of the resolution plan shall receive an amount that is not less than the liquidation value of their debt; (iii) the provisions shall apply to the corporate insolvency resolution process of a corporate debtor– (A) where a resolution plan has not been approved or rejected by the Adjudicating Authority; or (B) an appeal is preferred under section 61 or 62 or such appeal is not time barred under any provision of law for the time being in force; or (C) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan; (f) to amend sub-section (1) of section 31 of the Code to clarify that the resolution plan approved by the Adjudicating Authority shall also be binding on the Central Government, any State Government or any local authority to whom a debt in respect of payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, including tax authorities; (g) to amend sub-section (2) of section 33 of the Code to clarify that the committee of creditors may take the decision to liquidate the corporate debtor, in accordance with the requirements provided in sub-section (2) of section 33, any time after the constitution of the committee of creditors under sub-section (1) of section 21 until the confirmation of the resolution plan, including at any time before the preparation of the information memorandum. 4. The Bill seeks to achieve the above objectives. NIRMALA SITHARAMAN6 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—SEC. 2] FINANCIAL MEMORANDUM The Bill if enacted, would not involve any expenditure either recurring or non recurring from the Consolidated Fund of India. ———— MEMORANDUM REGARDING DELEGATED LEGISLATION Clause 6 of the Bill relating to amendment of section 30 of the Code empowers the Board to make regulations for specifying the manner of payment of debts. 2. The matters in respect of which the aforementioned regulations may be made are matters of procedure and administrative detail, and as such, it is not practicable to provide for them in the proposed Bill itself. The delegation of legislative power is, therefore, of a normal character. ——— DESH DEEPAK VERMA, Secretary-General. UPLOADED BY THE MANAGER, GOVERNMENT OF INDIA PRESS, MINTO ROAD, NEW DELHI–110 002 AND PUBLISHED BY THE SECRETARY-GENERAL, RAJYA SABHA, UNDER RULE 68 OF THE RULES OF PROCEDURE AND CONDUCT OF BUSINESS IN THE RAJYA SABHA. MGIPMRND—2005GI—29-07-2019.