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Section 29 (A) of Insolvency and Bankruptcy Code 2016

An opinion is coined from some quarter that section 29 (A) of IBC is stretched too far. Borrower may say so, but when a lender says this, the matter needs to be put under the glasses of the microscope, the matter needs to be brought to a de-section table. Section 29(A) deals with related party provisioning and aims to prevent defaulting promoters from taking back their companies at reduced value. Lender has put an example of two brothers who were separated 25 years ago – one brother has good business and the other brother has failed in the business. Lender has question the reason for debarring the brother who is successful businessman for taking part in submission of resolution plan due to failure in business of the other brother. Lender is a stakeholder is the whole process of Corporate Insolvency Resolution Process (CIRP). His stake is limited to get back the money which he gave as loan to a borrower. Sec 29(A) in no way affects his stake and in spite of the same lender is raising question about Section 29(A) of IBC 2016. Lender takes money from general public and invests the same in business entity. Lender belongs to organised sector, business house belongs to organised sector, but general public is in unorganised sector. Organised sector can take care of them. Government of a welfare state is to look after the interest of those who voice is unheard by others i.e. the general public who are in unorganised sector. The relationship among general public, bank and business entity is explained in the above figure. The comment of the lender that the section 29(A) has been stretched too far appears to be a remark without application of mind. He failed to appreciate the circumstances in which this section 29(A) was inserted in the IBC. Monumental size of stressed assets, fingers to the policy of the bank in lending money, it establishes that the policy of the bank in disbursing loan is faulty. Banker should focus his attention on this while trying to get rid of stressed assets. Otherwise at one end bank will get rid of stressed assets and at the other end further stressed assets will accumulate due to faulty policy of the bank is disbursing loan to business houses. When a government enacts legislation, it needs to keep in mind the interest of everybody who falls within the ambit of the legislation. The extreme cases i.e. the highest stratum and the lowest stratum may be affected but a balance needs to be drawn and legislation is made. The people in the highest stratum is mighty and has the strength to take care of the imbalance but the lowest stratum needs protection as they do not have might and strength. A debate is raised that everything cannot be painted with the same brush. It is true but the legislature cannot make legislation for every stratum of the society. Even if the government tries to make legislation for every stratum of the society, then the question will be raised about the parameter for creation of stratum of the society. So the legislation is one for the country, advocate need to explain the matter to the judiciary in such a way that the texture of the stratum of the society is captured and judiciary can interpret the legislation in that way. We must keep faith in the legislation and judiciary.