New Delhi: Finance Minister Arun Jaitley on Monday tabled in the Lok Sabha the Insolvency and Bankruptcy Bill, 2015, proposing to enact a single bankruptcy code and setting deadlines for processing insolvency cases.
Jaitley had announced on Saturday that the government intends to bring important legislative measures on structural reforms during the remaining three days left of parliament's winter session, notwithstanding the setback on the GST Bill.
The proposed law aims to reduce delays in resolution of insolvency cases and improve recoveries of amount lent to companies. The draft bill has proposed a timeline of 180 days, extendable by another 90 days, to resolve cases of bankruptcy.
The new bankruptcy code will help India in the World Bank's Ease of Doing Business ranking. India is currently ranked at 136 on this count in the 189-country ranking.
The current set of competing codes on the matter often results in the bankruptcy process dragging on for years, inflating costs for the parties concerned. Resolving a bankruptcy case can take on an average over four years in India.
Economic Affairs Secretary Shaktikanta Das tweeted on Sunday that the bankruptcy code would the biggest reform proposal after the Goods and Services Tax (GST) bill.
The bill is a money bill, and Rajya Sabha will have a limited role in its passing, unlike the GST Bill that has stalled because the ruling NDA does not have the numbers in the upper house.
The bankruptcy bill provides for creation of an Insolvency and Bankruptcy Fund and an Insolvency and Bankruptcy Board of India to regulate insolvency professional, agencies and information utilities.
The government had constituted a Bankruptcy Law Reform Committee, headed by former law secretary T.K. Viswanathan, to prepare a report on issues related to bankruptcy. Last month, the committee submitted its report along with a draft bill.
The committee had suggested that multiple adjudicating authorities be created and an Insolvency Regulator be formed.
Highlights of the bill:
- Consolidates into a single law a host of legislation that deals with the subject
- Allows operational creditors like employees to also call for insolvency resolution
- Proposes Insolvency Regulator to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and informational utilities
- Moots two separate Insolvency Adjudicators -- one with jurisdiction over companies and the other over insolvency and bankruptcy resolution of individuals
- Proposes fast-tracking resolution of insolvency cases and improve recoveries of amount lent to companies within a timeline of 180 days, extendable by another 90 days
- Moots "Fresh Start" process for indigent individuals with income and assets lesser than specified thresholds
- Proposes insolvency information utilities which would collate, authenticate and disseminate financial information from listed companies and creditors of companies.