Bikky Khosla | 29 May, 2018
Union Cabinet last week approved, via an ordinance, amendments to the
Insolvency and Bankruptcy Code (IBC), allowing promoters of companies
with turnover of up to Rs 250 crore to bid
for their companies against which insolvency proceedings have begun.
This is definitely good news for micro, small and medium enterprises.
Since the introduction of the new IBC norms, there has been a
widespread demand to ease the norms for the MSME sector, following
which the IBC review panel has
recently called for the same, and now the last week ordinance finally
paves way for the much-awaited relaxation.
the current norms, promoters of all companies, irrespective of their
turnover, are barred from bidding for their companies when they are
referred under IBC by one or more of their creditors, as it is feared
that this will allow the promoters to walk away with their stressed
assets at a discount. But now this norm is likely to be relaxed for
companies with turnover of up to Rs 250 crore. This is a welcome
decision. Unlike in cases of large companies, it is not easy to find
buyers for stressed small companies, and in absence of buyers--under
the current norms--they are bound to go through liquidation once
the resolution period is over. Now, this will not happen.
all, the MSME sector is a big employment generator in India,
employing more than 100 million people. Its contribution is more than
a third to gross domestic product and as much as 43 percent to
exports. So, the sector deserves some relaxations from the blunt and
unforgiving IBC norms. However, there should be some
reasonable restrictions so that unscrupulous MSME promoters are kept
away and only genuine
promoters are allowed to take part in the resolution process. While
some experts view that law should be the same for all, I support the 'equals
should be treated equally and unequals unequally' approach.
according to news reports, the proposed amendment also seeks to give
home-buyers the status of creditors in the insolvency process.
Classifying buyers as 'financial creditors' will help them swiftly get refunds from the
defaulting real estate companies. News abound in recent times about
home buyers facing hardships due to incomplete projects, and the
proposed measure, when implemented, will give a big relief to
home-buyers. The change
give a boost to the real-estate sector, which has long been facing
invite your opinions.