The Hindu Business Line : Govt to take up insolvency law issues with industry

THE Government is ready to discuss with trade and industry on the issues concerning the Companies (Second Amendment) Act, 2002, under the existing broad framework.

The Act, which deals with the new corporate Insolvency Law, empowers the Central government to constitute the National Company Law Tribunal (NCLT) and the Appellate Tribunal.

The Act provides for a modern, efficient and time-bound Insolvency Law to provide for both rehabilitation and winding up of sick companies which are being looked after by the Board for Industrial and Financial Reconstruction (BIFR), the Appellate Authority for Industrial & Financial Reconstruction (AAIFR), the Company Law Board (CLB) and High Courts at present.

"We are willing to discuss the concerns of the trade and industry. Our main focus is to create an environment where there is no industrial sickness," Mr Prem Chand Gupta, Minister for Company Affairs, said. Talking to Business Line, he said, at present the entire winding-up process is time-consuming and there is a need to hasten the process.

In fact, India Inc has been asking for a separate Insolvency Act on the lines of the US Bankruptcy Act for simplifying and expediting the winding-up process. The Federation of Indian Chambers of Commerce and Industry (FICCI) has been of the view that for sick companies, where revival is not possible, a mechanism should be evolved for their speedy exit, so that unproductive resources could be promptly redeployed.

On the issue of imposition of cess on the companies to build up a fund for rehabilitating and protecting the assets of the sick companies envisaged in the Act, Mr Gupta said, "This should not be the main concern. The focus should be on how to create an healthy corporate environment."

Corporate India has been very vocal against this cess provision. As per the proposed provision, non-industrial companies, such as financial companies, trading companies, service companies, companies engaged in IT business, in fact all companies would have to pay the cess for the revival of a sick industrial company.

According to FICCI, it raises several fundamental questions. "It may be argued that why a healthy company will be penalised to contribute for the faults of others. It will be extra cost for companies irrespective of profitability," it said.