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MSME dues should be paid during resolution process: Panel
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SME Times News Bureau | 04 Mar, 2020
Parliament's Standing Committee on Finance has said that payments due to
MSMEs who are operational creditors to a corporate debtor should be
cleared on a priority basis during the course of the resolution process.
In
its report tabled in the Parliament on Wednesday on the the Insolvency
and Bankruptcy (Second Amendment) Bill, 2019, the Standing Committee
said certain amendments in the bill may cause over-regulation of
suppliers, particularly of MSME suppliers.
The committee believes
that over-legislation through the bill must be avoided and the process
of delegated legislation through formulation of rules by Insolvency and
Bankruptcy Board of India (IBBI) be followed to strike a harmonious
balance between the needs and concerns of stakeholders.
"In this
context, the Committee would like to emphasise that the payments due to
MSMEs, who are operational creditors not included in the Committee of
Creditors (CoC), should be ensured on priority in the course of the
resolution process itself before the liquidation stage kicks in. The
Committee would therefore recommend that the Clause 5(b) (2A) should
accordingly be deleted," the report said.
It said that just to
make the IBC process smoother and in hope of a probable revival,
suppliers cannot be burdened with overly restrictive conditions.
It
recommended that market forces should resolve whether a supplier
decides to supply to a corporate debtor, as there are limited resources
available and each supplier has a limited capacity, which needs to be
channelised and allocated in the best interest of the economy and not
directed solely towards keeping the corporate debtor alive.
Clause
5(b)(2A) of the bill says: "The supply of goods or services that the
interim resolution professional or resolution professional, as the case
may be, considers critical to protect and preserve the value of the
corporate debtor and manage the operations of such corporate debtor as a
going concern, then the supply of such goods or services shall not be
terminated, suspended or interrupted during the period of moratorium,
except if such corporate debtor has not paid dues arising from such
supply during the moratorium period or in such circumstances as may be
specified." On the protection of new promoters of a corporate
debtor from prosecution for wrong doings by the former management, the
panel, in its report, said that it is in agreement with the intent of
this amendment to safeguard the position of the resolution applicant by
ring-fencing them from prosecution and liabilities under offences
committed by erstwhile promoters.
The Insolvency and Bankruptcy
Code represents a transformational framework not only for the resolution
of defaulting corporate debtors, but more importantly in establishing
powerful incentives to avoid default altogether, said the committed
headed by BJP member Jayant Sinha.
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