The Insolvency and Bankruptcy (Amendment) Bill, 2021 was passed by the Rajya Sabha on Tuesday amid the usual ruckus which we often see in Parliament proceedings. The Bill was introduced on 26 July 2021, debated and passed by the Lok Sabha on 28 July 2021. It introduces a new chapter, “Chapter III-A” to the Insolvency and Bankruptcy Code, 2016 which provides for a new Pre-packaged insolvency process for MSME sectors.
The Bill was introduced by Finance Minister Shri Nirmala Sitaraman and was also moved by the Finance Minister. The Bill was debated and passed by the Rajya Sabha within 40 minutes. However, what the MPs debated or argued on the Bill was not clearly audible as the Opposition parties made use of the session to raise up the ongoing political debates about Pegasus and the protests from the Opposition were such that the House had to be adjourned twice.
The IBC, 2016 was amended by an Ordinance in April 2021 since the Parliament was not in session. The said Bill seeks to replace the Ordinance and it provides a Pre-packed insolvency resolution mechanism for MSME debtors. A new chapter, Chapter III-A is proposed which provides an alternate insolvency process i.e. pre-packed insolvency resolution. The striking feature is that this can be initiated only by the debtors provided that the debtor has a base resolution plan. Further, the management of the company will remain with the debtor. This process can be initiated only by debtors who are classified as corporate debtors under the MSME Development Act, 2006 in the event of default. In India, the MSME sector is very important to the economy not only in its contribution to the GDP but also in the generation of employment.