One of the main reasons why the government is planning to amend this law is because of the political controversies attached to it.
The government is mulling amending the Insolvency and Bankruptcy Code (IBC) which will stop defaulters — existing promoters of bankrupt firms — to reacquire their firms during the process at a discounted rate, reports the Economic Times.
Under the current IBC law owners are allowed to buy stake and claim some of the stressed assets when it is put up for sale by the creditors.
One of the main reasons why the government is planning to amend this law is because of the political controversies attached to it. "There is some discomfort with it (the possibility of promoters buying back assets at a discount). It is being looked at," sources told the paper.
The changes are likely to be introduced as soon as possible. “We are examining it. An amendment to the law could be introduced in the next session of Parliament,” officials told ET.
The Ministry of Corporate Affairs is keenly looking into the matter and said that there are differing views on this matter. Since IBC is a recent law, the government is watching the progress in the resolution cases.
On the other hand, some officials believe that banning promoters from the process is not enough. An official ET spoke to, mooted that there are economies that bar incumbent promoters and such a restriction should have come earlier.Currently, the law allows Independent Resolution Professionals (IRPs) to choose and invite prospective lenders, investors and interested parties to showcase the debtor who has been declared insolvent.