The Opposition today attacked the government for trying to benefit a particular corporate by seeking to amend the insolvency and bankruptcy code, dubbing the bill on the issue as "tainted" and demanding that it be referred to a Standing Committee.
However, the government said the amendments to the Insolvency and Bankruptcy Code (IBC) is intended to provide relief to homebuyers and the MSME sector.
Moving the Insolvency and Bankruptcy Code (Second Amendment) Bill 2018, Finance Minister Piyush Goyal said "we want to address concerns expressed by the MSME sector and homebuyers. We have learnt from two years of implementation of IBC, and through the amendments, we want to strengthen IBC bill."
Participating in the debate on the measure, Congress member Veerappa Moily said the National Company Law Tribunal (NCLT) has become "an instrument for siphoning off funds" of the treasury as banks were taking huge haircuts and corporates were buying out insolvent companies for paltry sums.
"Be fair and refer the bill to the Standing Committee. Because you got stuck up in the NCLT, you brought in the bill. The Ordinance is tainted and sending it to the Standing Committee will remove the taint," he said, adding that the "greed" behind bringing the bill is to "loot the banks".
Moily, a former Corporate Affairs Minister, said if the bill was referred to the Standing Committee, then it would submit its report within 15 days. Moily is the Chairman of the Standing Committee on Finance.
N K Premachandran (RSP) said the promulgation of the IBC (Amendment) Ordinace was a "clear case of crony capitalism", saying it intended to benefit a particulate industrial house.
"Alok Industries owed Rs 30,000 crores to banks, Reliance Industries bought it in Rs 5000 crore, banks loss was Rs 25000 crore," he asserted, while alleging that undue haste was shown by the government in bringing the bill.
Questioning the government's urgency in bringing the IBC Ordinance when the Monsoon Session was just a month away, P Venugopal (AIADMK) said a perception was being built that the government has brought in the amendment bill to facilitate one corporate house.
"The IBC is being amended in haste to allow Reliance Industries to take over Alok Industries.... In the name of NPA clean-up, the government should not be seen as supporting crony capitalism," Venugopal said.
Saugata Ray (TMC) said the government was leading the country to a 'blind alley' and the IBC should not be seen as a panacea for all illness.
"Mr Goyal, our caretaker Finance Minister, we can't see the banking sector collapse... I support the Congress demand of referring the bill to the Standing Committee," Ray said.
He said under the resolution process, banks were taking huge haircuts and the IBC is leading to "crony capitalism".
Citing the resolution process of the Alok Industries, Ray said Reliance Industries could not acquire the company at the first instance since the resolution plan got less than the required 75 per cent vote.
"The IBC amendment bill brought by the government lowers the minimum vote requirement for passing the resolution to 66 per cent from 75 per cent in the original act. Just for 66 per cent vote, you can acquire a company. Just for Reliance Industries, Government has brought an Ordinance," Ray said.
The TMC member said in case of Bhushan Steel takeover by Tata Steel, the banks had taken 40 per cent haircut and lost Rs 21,000 crore. In case of Vedanta buying Electrosteel, the haircut was 60 per cent and the banks lost Rs 8,400 crore.
As regards Alok Industries, banks have taken a 83 per cent haircut and the loss is to the tune of Rs 25,000 crore, he claimed in the House.
The bill seeks to create monopoly as 2 or 3 steel companies would gobble up the industry and then there would be cartelisation, Ray said.
BJD's Bhartuhari Mahtab by bringing an ordinance to benefit one corporate house. With this move, he said move the government has exposed itself.
P Karunakaran (CPI-M) also questioned the objective behind the bringing the ordinance. He said the government has resorted to the amendments to benefit Reliance Industries.
The bill, introduced in the Lok Sabha by Goyal last week, replaces the Ordinance which was approved by the Union Cabinet in May.
The amendments to the IBC was intended to give relief to the homebuyers by recognising their status as financial creditors, thus giving them due representation in the Committee of Creditors (CoC) and making them an integral part of the decision-making process.
The bill also proposes to reduce the minimum voting threshold for the Committee of Creditors (CoC) to 66 per cent, from 75 per cent for key decisions-- a provision which was opposition said was aimed at benefiting one corporate.
Moving the bill, Goyal said alleged that the previous governments had also come out with laws like SARFAESI Act, Debt Recovery Tribunal (DRT), but loan recovery related matters had remained unresolved for years.
"And earlier during the loan recovery process the value of assets used to get reduced substantially. The amount recovered used to be very less," Goyal observed.
"For the time bound auction of assets of loan defaulting companies, and to ensure maximum recovery of bank loans , we have brought IBC," he added.
As per the amendments, Micro, Small and Medium Enterprises (MSME) sector would get a special dispensation under the Code.
The amendments also do not disqualify the promoter to bid for his enterprise undergoing insolvency process provided he is not a wilful defaulter.
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