The Cabinet on Wednesday approved the promulgation of an Ordinance to amend the Insolvency and Bankruptcy Code, which is expected to bar wilful defaulters from buying back their own stressed assets.

Finance Minister Arun Jaitley, who made the announcement after the Cabinet meeting on Wednesday, declined to provide details. But sources said the proposed Ordinance is expected to streamline the selection of buyers and stop wilful defaulters from buying back stressed assets they previously owned.

Accordingly, a new section will be inserted to list persons ineligible to be ‘Resolution Applicants’. These would include wilful defaulters, undischarged insolvents, disqualified directors, persons who have indulged in preferential transactions or under-valued transactions or fraudulent transactions as determined by the adjudicating authority, and persons who are promoters or in the control of such persons whose account is classified as non-performing assets beyond a prescribed duration.

The Ordinance would also prescribe basic eligibility criteria for resolution applications, depending on the size of the business. Additionally, it is understood to provide a robust due diligence framework to help the Committee of Creditors assess creditworthiness, credibility and other parameters.

The Ordinance is expected to take effect from Thursday. “The amendments will be tabled in Parliament in the next session,” Jaitley told reporters.

The Code was passed by Parliament last year and became operational from December 2016. However, concerns had emerged that promoters could buy back the stressed assets.

15th Finance Comission

The Cabinet also approved setting up of the Fifteenth Finance Commission that will prescribe the formula for devolution of taxes between the Centre and States for five years commencing on April 1, 2020.

“The next step is appointing the personnel of the Commission and finalising its terms of reference... It will be done very soon,” Jaitley said.

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