Opposition asks government for relief to common man on lines of pause in insolvency proceedings against firms

Opposition parties Saturday demanded in the Rajya Sabha that the government waive interest on loans to farmers and individuals for the coronavirus pandemic period on the lines of a pause in insolvency proceedings against defaulting corporates.

Participating in a debate, K K Ragesh of CPI (M) said Finance Minister Nirmala Sitharaman and other members have told the House that the Insolvency and Bankruptcy Code (Second Amendment) Bill has been brought to save businesses and corporates.

"Why the same logic is not applied in the case of farmers? Farmers are also bankrupt. Why the government is not taking any responsibility and any initiative in waiving the farmers’ loans?" he asked.

Ragesh said the government could have at least considered to "waive the interest on farmers loans during the moratorium period”.

DMK member P Wilson said, "There is discrimination between common man and corporate. Why is this discrimination? Is the government here for crony corporates?"

He demanded the government waive off recovery as well as repayment of all bank loans and credit card bills.

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Wilson asked for a complete waiver of agriculture term loans.

Initiating the debate, Congress member Vivek Tankha said the government should protect only those businesses which are affected by Covid-19 pandemic and not all defaulters.

He said the Section 10-A in the Bill states that no application for initiation of the Corporate Insolvency Resolution Process (CIRP) shall be filed for any default, whether Covid-19 related or not, arising on or after March 25 for a period of six months or such period not exceeding one year form such date as may be notified.

The Congress leader asked the government whether it was sure that the coronavirus pandemic would end in one year.

"When you are suspending Section 7,9,10, I think it's a makeshift solution to a long standing problem. There is no certainty that the economy will revive in one year."

He pointed out that Gross NPA of banks went up from Rs 2.63 lakh crore in March 2014 to Rs 10.3 lakh crore in March 2018.

"NPA and defaulting problems are pre-pandemic and Section 10-A would only postpone the problem and not solve it," Tankha said, adding the creditors would be in a worst position with likely erosion in the value of assets.

"The entire object of IBC Code is compromised by this amendment. The Code aims to prevent wilful default by companies. However, the blanket bar on Sec 7,9,10 will enable many companies which are already under defaulting categories to use the notification as a shield to protect themselves in future proceedings.

Read: Rajya Sabha approves amendments to Insolvency and Bankruptcy Code

"Do we want to protect Covid-19 category of industries or all industries irrespective of their performance in the past. Section 10-A does not make distinction between Covid-19 defaults and other defaults," he said.

About giving relief under the IBC, Arun Singh (BJP) said, "It was very much needed. It was very difficult to find out which transaction is Covid-related....If my friends can tell that these are Covid-related transactions and these are not related to that then I will be very happy. But it is simply impossible."

TMC member Dinesh Trivedi said, "The intention of the bill is good. But you are in a hurry to do things without larger consultations. That is why the Bill is hastily drafted and an ill-worded piece of legislation, which would defeat its own purpose."

He said, "We have record level of food stocks. Oil prices are historically low...The need of the hour is to put, maybe Rs 10,000 or Rs 15,000 or Rs 20,000, into the bank accounts of needy people."

Trivedi said this would help in creating demand, generating more jobs and more tax revenues for the government.

SP leader Ravi Verma was of the view that this Bill will support big corporate and also asked the government about the wilful defaulters who have fled the country.

Verma alleged insolvency professionals are charging very hefty fees and generally eat up a large chunk of haircut.

Amar Patnaik (BJD) asked the government to improve the quality of debt resolution as well as competence of insolvency professionals.

AIADMK leader A Vijaykumar suggested that cooperative societies not be brought under the insolvency code.