Amid ‘Act of God’ Jibe, RS Passes Insolvency and Bankruptcy Code

Union Finance Minister Nirmala Sitharaman.

(Photo: PTI)

The Rajya Sabha on Saturday, 19 September, passed the Insolvency and Bankruptcy Code Bill (IBC), amid opposition members taking a jibe at Union Finance Minister Nirmala Sitharaman's 'act of God' statement vis-a-vis the COVID-19 pandemic's effects on the economy.

The objective of the Bill is to replace the current Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020, which will now prohibit the initiation of insolvency proceedings for defaults arising over the six months from 25 March that could extend up to one year.

Finance Minister Sitharaman defended the amendment and addressed the concerns raised by some of the Rajya Sabha MPs, including those who opposed the move.

“The situation before us in March was clearly about putting lives before livelihood. When the PM announced the Janata Curfew, he said it was a preventive remedy and did not know how long it will last. Naturally, the lockdown impacted businesses and financial market. But did we just sit and watch? No,” Sitharaman said in a prelude to why the government brought forth various ordinances in the first place.

Binoy Viswam of the Communist Party lashed out at Sitharaman for her “act of God” comment saying: "The Indian economy is in bad shape. Don't accuse God; God is not the culprit."

Speaking in the Lok Sabha the finance minister said that her remark is being criticised also because she "looks like a neighbourhood aunty" and reiterated that twisting her comment is irresponsible.

Sitharaman further went on to add that the suspension of Sections 7, 9 and 10 of the IBC was to make sure that businesses do not get pushed into insolvency. "The priority is to keep the companies going rather than liquidate them," she said.

Amid the discussion, BJP MP Arun Singh defended the Bill while taking a dig at the Congress. He maintained that the bank NPAs have since reduced, calling the amendment Bill a remarkable and bold step.

Congress member Vivek Tankha said that the enactment of Section 10 will be counterproductive. He added remarks about the uncertainty of the COVID-19 pandemic and claimed that small traders would be affected while the government was trying to protect big corporates.

Nationalist Congress Party's (NP) Praful Patel came out in support of the amendments since the government's goal was temporary and that there might be more amendments required in the future.

Amar Patnaik of the Biju Janata Dal asked that since the IBC had been fairly successful from 2016, what was the need for the three ordinances. CPI-M's KK Ragesh said that since the ordinance prohibited insolvency proceedings for a year, it would push the banking sector to a crisis.

(With inputs from IANS.)