New owner of bankrupt companies will not get punishment for previous work
New owner of bankrupt companies will not get punishment for previous work
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The government is going to change the Insolvency Act (Insolvency Code) to protect the new owners of bankrupt companies from the punishment of the past owners' crime. According to sources, the cabinet may soon approve the change in the three-year-old Insolvency and Bankruptcy Code (IBC) for this. The government will soon seek cabinet approval to change the insolvency law to provide protection to companies purchased through the National Company Law Tribunal (NCLT). This will increase the confidence of those who buy such properties. If this does not happen, there will be a fear of buyers getting caught in the law of these assets.

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A media reporter reported on December 4 that steel giant ArcelorMittal had sought an assurance of future rescission over the investigation of the company or its past promoters Ruia family in the Essar Steel deal. ArcelorMittal has bought Essar Steel as part of the Insolvency Act process. The amendment to the IBC, made in December 2016, will eventually require parliament's approval. In addition, the current session of Parliament ends this week.

The Enforcement Directorate (ED) confiscated the assets of the former promoters Singhal family over allegations of money laundering in the Bhushan Power and Steel case, raising concerns of the company buying under the bankrupt court. When JSW Steel was going to buy Bhushan Power and Steel, the ED attached the property of the Singhal family. There was also a debate on the matter as to which of the ED and National Company Law Appellate Tribunal (NCLAT) would be preferred over the assets of the bankrupt company. Last October, the NCLAT had strongly criticized the ED in this case and directed it to remove the seizure from the assets of Bhushan Power and Steel.

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A bench of NCLAT headed by Justice SJ Mukhopadhyay told the ED, "You are harming the economy of the country. You are playing with fire." He further said, "No person will buy a bankrupt company. Bankruptcy law cannot be abolished in this way." Last month, the country's top court approved billionaire Lakshmi Mittal's bid for Essar Steel's Rs 42,000 crore company. Essar Steel owes banks Rs 54,550 crore. At the moment, ArcelorMittal is awaiting an amendment to the Insolvency Act before giving the money of the deal to the banks. The questions asked by email about possible changes in this law were not received from the Finance Ministry and Insolvency and Bankruptcy Board of India (IBBI) till the time of writing.

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