Extending indemnity to successful bidders of loan defaulting companies, Finance Minister Nirmala Sitharaman on Monday said the government will not launch any criminal proceedings against those who buy out a bankrupt company and no tax claim will be raised against them after implementation of a resolution plan.
Replying to the debate on a bill to amend the three-year-old Insolvency and Bankruptcy Code (IBC) in the Rajya Sabha, she said the government will implement in phases insolvency regulations for individuals including those who give personal guarantees for loans taken by defaulting companies.
The Insolvency and Bankruptcy Code (Amendment) Bill, 2019 makes it "binding on the government" that it will "not raise any further claim after resolution plan is approved," she said in her reply after which the House passed the legislation by a voice vote.
Under the IBC, loan defaulting companies are auctioned and successful bidder, called resolution applicant, takeover such firms after paying off an amount they had bid.
However, Sitharaman -- who is also the Corporate Affairs Minister -- said criminal matters will continue to be pursued against individuals of the loan defaulting companies.
"Criminal matters alone are proceeded against individuals, not a company. There will be no criminal proceeding against successful resolution applicant. There will be no criminal proceeding against successful resolution applicant for fraud by previous promoters," she said.
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The IBC, she said, gives that comfort for all new bidders and they "need not now be scared" over taxmen coming after them for the faults of the earlier promoters.
"Once the resolution plan is accepted, the earlier promoter will be dealt with as individual for their criminality but not the new bidder who is trying to restore the company," she said.
On individual insolvency, Sitharaman said the rules and regulations in respect of personal guarantors to corporate debtors are ready.
"We would be operationalising them soon," she said. "Two other categories, proprietors and partnership firms, which also come under the realm... and other individuals will be done in a phased manner but we are making provisions for all of them."
On Congress leader Jairam Ramesh's query regarding successful bidder not paying to take over the defaulting firm, she said: "The regulation introduced on January 24, 2019, requires performance security before approval by the adjudicating authority."
"Criminal prosecution is also possible," she said. "So if somebody successfully claims that he can come up with a thing and bids for it, and later does not show up, criminal prosecution is permissible."
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