The government on Monday introduced insolvency and bankruptcy code bill in Parliament that for the first time sets deadlines for processing insolvency cases, which usually took years and escalated costs for investors.
Called the Insolvency and Bankruptcy Code 2015, the bill once enacted will make it easier for sick companies to either wind up their businesses or engineer a turnaround. It will improve ease of doing business.
The bill was tabled in Lok Sabha by Finance Minister Arun Jaitley. The proposed bankruptcy code will cover individuals, companies, limited liability partnerships and partnership firms.
The bill prescribes a swift process and timeline of 180 days for dealing with applications for insolvency resolution. This can be extended for 90 days by the adjudicating authority only in exceptional cases.
The bill also provides for a fast track insolvency resolution process which may be applicable to certain categories of entities. In such a case, the insolvency resolution process has to be completed within a period of 90 days from the trigger date
No single law
The bill seeks to provide for designating National Company Law Tribunal (NCLT) and Debt Recovery Tribunal (DRT) as the adjudicating authorities for corporate persons and firms and individuals respectively for resolution of insolvency, liquidation and bankruptcy.
At present, there is no single law dealing with insolvency and bankruptcy.
Liquidation of Companies is handled by the High Courts, individual cases are dealt with under the Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920.
Introduction of bankruptcy bill is significant for other reforms to progress especially after the Goods and Services Tax (GST) Bill was put o n the backburner even in the Winter session.
If bankruptcy bill is passes and the law is enacted timely it will be reflected in the World Bank’s Ease of Doing Business ranking next year.
India currently ranks 136 in the list of 189 countries in the World Bank’s Ease of Doing Business.
Liked the story?
0
0
0
0
0
