Union Finance Minister Nirmala Sitharaman on Saturday said that insolvency proceedings against the corporate debtor and personal guarantor can be initiated together under the Insolvency and Bankruptcy Code and should be pursued simultaneously for a comprehensive resolution process.
Speaking during the debate on the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 in the Rajya Sabha, she noted that given that individual insolvency proceedings are likely to impact a large section of the population, it was decided to commence provisions relating to personal guarantors and corporate debtors and then move ahead with other categories based on the learnings and experiences.
“The corporate debtor often has guarantors; so for comprehensive insolvency resolution and liquidation we felt it was necessary that the insolvency of the corporate debtor as well as the guarantor are considered together to whatever extent possible,” Sitharaman said.
She also said that the IBC ensures that most of the resolutions let the company remain a going concern rather than liquidate it.
“The way this code functions, it ensures that most resolutions are happening to make the company a going concern only, rather than liquidate them,” the Finance Minister said.
The Rajya Sabha on Saturday passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020, which seeks to replace the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020, which was promulgated on June 5 to prohibit initiation of insolvency proceedings for defaults arising during the six months from March 25 that is extendable up to one year.