August 1, 2019
Saugata Roy speaks on The Insolvency and Bankruptcy Code (Amendment) Bill, 2019
Thank you Sir.
Sir, I shall be very brief. I support The IBC Code (Amendment) Bill in principle, totally. I just want to point out the information that have surfaced as far as the Bill is concerned. I also want to remind you, Sir, that we were in this House, and you as well, when we passed the IBC Code. It was arrived at after consultation in a Select Committee of the House. So the IBC Code was very thought out. Still it has been proved that there was a need, in three years, for three Amendments, though they were not perfect. The present Amendments do fill up some critical gaps in the IBC Code.
Sir, we are bringing this amendment in the backdrop of VG Siddhartha’s (the owner of Cafe Coffee Day) suicide. Tax terrorism has driven people to suicide. This is not desirable in a country where we are looking for investment and entrepreneurship. I hope the Finance Minister will take care of the tax terrorism that is prevalent in the country. If I were the Finance Minister I would not be able to sleep at night. It’s true that the IBC Code has reduced the NPAs to Rs 3.5-4 lakh crore. But still today, the total NPA is Rs 10.35 lakh crore. With the banking system is in such a doldrum, I don’t know how the Finance Minister sleeps at night.
Two problems have surfaced. One is with regard to home buyers. In the case of JP Infratech, the developer failed to deliver thousands of homes in Noida. In the event of liquidation, home buyers get little back. There are parties such as banks that get precedence when the spoils are distributed. The IBC code has failed in the case of home buyers. The other is about the resolution of the Essar Steel case. It has dragged on for more than 270 days due to which the Government has extended the relevant period to 330 days.
Sir, the other point I want to mention before the Honourable Minister, whose Bill I have supported, is this – that the resolution are allowing huge haircuts. If you have noticed, the haircut in the case of buying of Electrosteel Steels by Vedanta was 60 per cent, in the case of Bhushan Steel, the realisation was 63 per cent, and in the case of Monnet Ispat, the realisation was 26 per cent. In other words, the IBC code will not be as potent if you give such big haircuts. Then what will come to the kitty of the banks?
Lastly Sir, I want to mention, among the various Amendments, Section 30 – statement of operational creditors and secured creditors under resolution plan should be fair and equitable. This Amendment will completely dilute the National Company Law Appellate Tribunal ruling in the Essar case, which has still not being resolved. The others are innocent Amendments in the sense that they are clarifications. For example, the Finance Minister should clarify whether in Section 526, the resolution should include merger or demerger.
The order is that within 14 days the authority will ascertain the existence of default. This is welcome. In Section 12, the 330 days is a very ambitious scheme. It is doubtful whether the Government will be able to resolve.
I will say that this Amendment is a positive step to strengthen PIBC. But the Minister has to take up the problem of non-performing assets of banks which have jumped to Rs 10.35 crore and do away with tax terrorism, before we claim credit that we are 77th in the rank of Ease of Doing Business. A country like India, aspiring to be the third largest economy, is 77th and we beat our chest.
I think today the Minister has replied to a lot of queries with clarity. I am thankful to her for the same. Also, she has touched upon the many sensitive issues including Jet Airways and other issues which normally Ministers don’t speak. But she has, in the process of giving the list, has mentioned only six out of the 12 important companies which were referred by the RBI. So I would like to complete that list with your permission, Sir. The other question is with regard to JP Infratech. A large number of people deposited money with JP for buying flats. They also built the Noida Expressway.
‘The resolution plan submitted by a resolution applicant can be approved by the committee of creditors (CoC) if 66 per cent votes are cast in its favour. However in JP’s case, home buyers form 59.4 per cent and the voting share of banks and financial institutions is 40.6 per cent. On paper, there were 23,600 home buyers. Now how will they get their compensations? The Government must find out a solution. Ek ek company pe charcha hona kharap nahin hain, Jet Airways idhaar nahin uthayenge toh kahan uthayenge. JP ka baat yahan nahin uthayenge toh kahan uthayenge, Esaar Steel ka haircut ka baat yahan nahin uthayenge toh kahan uthayenge. Yehi to Sadan hain, yahan hi toh utha sakte hain