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The Finance Minister Arun Jaitley on Monday introduced in Lok Sabha a Bill that would pave the way for complete overhaul of current insolvency and bankruptcy system in the country.
This Bill--Insolvency and Bankruptcy Code 2015--was introduced in the lower house only after the Speaker Sumitra Mahajan rejected opposition demands that introduction of the Bill be deferred to some other date.
Member of Parliament NK Premachandran --who objected to the introduction of the Bill--contended that the Bill was defective and therefore could not be introduced.
REGULATOR
The Insolvency and Bankruptcy Code also provides for the setting up of 'Insolvency and Bankruptcy Board of India' (IBBI) to regulate insolvency professionals, insolvency professional agencies and informational utilities.
Till the Board is set up, the Centre will exercise the powers of IDBI or designate any financial sector regulator to exercise the powers of the Board.
The Insolvency and Bankruptcy Code also provides for the setting up of a fund - - "Insolvency and Bankruptcy Fund of India".
Insolvency professionals will assist in completion of insolvency resolution, liquidation and Bankruptcy proceedings envisaged in the code.
Information utilities will collect, collate, authenticate and disseminate financial information to facilitate such proceedings.
The Insolvency and Bankruptcy Code 2015 also seeks to amend as many as 12 existing legislations including Companies Act 2013, Income Tax Act and Payment and Settlement Systems Act 2007.
As on date, there is no single law in India that deals with insolvency and bankruptcy.
Provisions relating to insolvency and bankruptcy for companies are currently spread over several statutes.
The new framework seeks to consolidate and amend the laws relating to reorganisation and resolution of Corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of Assets.
Ease of doing business
The new bankruptcy code is significant as it seeks to ensure insolvency resolution of corporates and individuals in a time bound manner.
The Bill on bankruptcy code has fixed a timeline of 180 days, extendable by another 90 days, for resolving cases of insolvency or bankruptcy.
The current system is marred by delays.It takes anywhere between five to 15 years for lenders to recover money in the event of default.
Legal experts point out that parallel proceedings before different forums (courts, debt recovery tribunals) often led to conflicting views and caused delays in resolving debt related issues for lenders.
It is widely believed that an overhaul of the bankruptcy system in the country would help India improve its 'Ease of Doing Business' rankings.
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