Joint parliament standing committee clears bankruptcy law

The joint parliament standing committee has cleared the Bankruptcy and Insolvency Code and is likely to be discussed in the current budget session of parliament. The Bill was introduced in Lok Sabha in December 2015.

Also, to make the recovery process more efficient and expedient, the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act and Debt Recovery Tribunal (DRT) Act have been amended.

About the Bankruptcy Bill:

• The proposed Bill aims for a complete renovation of the current insolvency and bankruptcy system in India, which will help streamline the procedure of revival of companies facing financial distress.
• It also aims to improve the ease of doing business and attract more investment in the country.
• The Code will help Indian firms to exit an ailing business while banks stand to gain as they can recover their dues in time.
• The Bill proposes adherence to strict deadlines to decide whether to liquidate a sick company or not, wherein the decision to liquidate a company will have to be reached within 180 days.
• The Bill proposes the setting up of an Insolvency and Bankruptcy Board of India to regulate insolvency professionals and agencies. It also proposes the setting up of a fund dubbed the –Insolvency and Bankruptcy Fund of India.

Significance of this Bill:

As of now, there is no single law that deals with insolvency and bankruptcy in India. A number of provisions spread across various statutes have rendered the insolvency and bankruptcy-related process a legal quagmire significantly hindering the ease of doing business in the country. The new Bill seeks to consolidate all of this into a single Code.

Background:

The Finance Minister Arun Jaitley, in his Budget Speech 2015-16, had identified Bankruptcy Law Reform as a key priority for improving the ease of doing business and had announced that a comprehensive Bankruptcy Code, meeting global standards and providing necessary judicial capacity, will be brought in fiscal 2015-16.

Accordingly, the Government had constituted the Bankruptcy Law Reform Committee to look into various Bankruptcy related issues and give its report along with a draft Bill on the subject to the Government.