Centre wants promoters to hold unlimited bankruptcy liabilities in case of criminal action: Report

The Centre is looking at isolating bankruptcy liabilities with promoters instead of the companies, The Times of India reported.

One amendment proposal intends to make promoters face unlimited liability in case of criminal action while the entity is protected, the paper quoted sources as saying.

Moneycontrol could not independently verify the report.

Around 10 amendments to the Insolvency and Bankruptcy Code (IBC) are set to be moved in Parliament during the current session by Finance and Corporate Affairs Minister Nirmala Sitharaman.

The move is significant in light of recent events, as seen in the case of Bhushan Steel and Power, where insolvency proceedings went for a toss after the Enforcement Directorate (ED) attached the company’s assets while JSW Steel was set to take over.

Further, the government also intends to ensure that entities related to the promoters under action may be ineligible to participate in the resolution process as well. This is because there have been cases where promoters walked away with the entity after forcing lenders to take steep haircuts.

Another one would give relief to home buyers, where at least 10 percent of 100 home buyers or debenture holders would now be required to agree to approach the National Company Law Tribunal (NCLT) to initiate IBC proceedings.

Sentiments in the sector were uncertain after a case where a single home buyer initiated proceedings.

The amendments are being viewed as “fresh emergency measures”, Sitharaman told the paper.