Bankruptcy bill tabled in LS

MACRO EFFECT New bill seeks to boost investments, push economic growth

To have the bankruptcy code working properly, to get the appropriate legislation passed, it will take some time but once it is passed, we will have a world-class bankruptcy code JAYANT SINHA, minister of state, finance, in an interview to HT earlier

It has often been said that it is hard to start a company in India, and even harder to shut one. Having addressed the first, to an extent, in its effort to improve the ease of doing business, the government on Monday took a vital step in addressing the second by introducing a bill in the Lok Sabha to replace the archaic bankruptcy rules. The proposed law promises to be much kinder to sick companies that turn insolvent for genuine reasons.

The ‘Insolvency and Bankruptcy Code, 2015’ tabled by finance minister Arun Jaitley aims to provide resolution for such cases in a time-bound manner. Once, the bill turns into law, it would boost investments — both domestic and global, which in turn would push economic growth. The bill stated that objective was “to consolidate and amend the laws relating to re-organisation and insolvency resolution of corporate persons, partnership firms, and individuals in a timebound manner for maximisation of value of assets, to promote entrepreneurship and availability of credit.”

“To have the bankruptcy code in place, to have it working properly, to get the appropriate legislation passed, it will take some time but once its passed, we will have a world-class bankruptcy resolution,” Jayant Sinha, minister of state for finance, told HT earlier.

The bill proposes a timeline of 180 days for dealing with applications for insolvency resolutions, which could be extended by another 90 days. It also suggests early identification of financial stress in companies, which could help in their revival. The new set of norms would allow easy exits for firms while protecting the rights and interest of lenders. The bill also seeks to set up an insolvency and bankruptcy board to regulate professionals, agencies and information utilities engaged in resolution of insolvencies of companies, partnership firms and individuals.

There is also a proposal to set up a Insolvency and Bankruptcy Fund of India.

India currently does not have a single law, which can address issues relating to insolvency and bankruptcy. Liquidation of companies is a long-drawn process handled by the courts.