Indian Industries Association (IIA) raises concern over amendments to the Insolvency and Bankruptcy Code, 2016 (“IBC”)
By INSOL India - Editorial Team Posted On : June 01, 2020
Various people in the IIA have raised concerns in relation to the amendment of Section 4 of the IBC stating that such amendment is against the interests of MSMEs.
In a letter, the IIA has stated that, “The Finance Ministry has announced the amendment of section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), by which one crore rupees is the minimum amount of default instead of rupees one lakh for filing cases in NCLT. The Finance Ministry has taken the plea that this has been done so that the MSMEs are protected. This amendment has been very promptly issued [F. No. 30/9/2020-Insolvency) on 24th March, 2020 on the same date of announcement.”
The concern raised by the IIA was in relation to the modification of the minimum amount of default required for filing of an application for initiation of CIRP under the IBC from INR 1 lakh to INR 1 crore with such change stated as being a major deterrent for MSMEs who inevitable end up suffering in terms of recoveries.
The letter further stated that “This statement of FM and amendment has taken the MSMEs by surprise as we had never raised the issue. It seems the amendment has been basically done to please the large industries so that MSME cannot file cases in NCLT. MSME now shall have to wait till the debt becomes One Crore instead of One Lakh.”
The letter concluded stating that the increase in threshold for determining default under the IBC was not in the interest of smaller debt organizations and was not an encouraging amendment for the IBC.
In a letter, the IIA has stated that, “The Finance Ministry has announced the amendment of section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), by which one crore rupees is the minimum amount of default instead of rupees one lakh for filing cases in NCLT. The Finance Ministry has taken the plea that this has been done so that the MSMEs are protected. This amendment has been very promptly issued [F. No. 30/9/2020-Insolvency) on 24th March, 2020 on the same date of announcement.”
The concern raised by the IIA was in relation to the modification of the minimum amount of default required for filing of an application for initiation of CIRP under the IBC from INR 1 lakh to INR 1 crore with such change stated as being a major deterrent for MSMEs who inevitable end up suffering in terms of recoveries.
The letter further stated that “This statement of FM and amendment has taken the MSMEs by surprise as we had never raised the issue. It seems the amendment has been basically done to please the large industries so that MSME cannot file cases in NCLT. MSME now shall have to wait till the debt becomes One Crore instead of One Lakh.”
The letter concluded stating that the increase in threshold for determining default under the IBC was not in the interest of smaller debt organizations and was not an encouraging amendment for the IBC.