AMEND BANKRUPTCY CODE, GEHLOT REQUESTS CENTRE

JAIPUR: Chief minister Ashok Gehlot has requested Prime Minister Narendra Modi to safeguard the state government’s assets and interests of workers in the eventuality of insolvency of a government enterprise.

In a letter written to the PM on Tuesday, Gehlot requested him to make suitable amendments in the Insolvency and Bankruptcy Code (IBC), 2016, in this regard.

Pointing out discrepancies in the law, Gehlot stated that the objective of the IBC should be to restart the locked down or sick industrial units.

Gehlot stated that in the event of liquidation of an enterprise, the code provided for payments of salaries and wages to the workers for 24 months. “Such a meagre payment would not be enough for the workers facing the crisis of livelihood and would cause unrest among them. Sometimes this would cause a law and order issue,” he added. Gehlot wrote to the PM that any government enterprise would consist of the investment of government land, building and other invaluable assets into it. But in the circumstances of liquidation of this unit, the bankruptcy code provided no priority for repayments against these investments and other crown dues. It was a serious howler in the law, the CM said. Also, he stated, in the event of liquidation of the enterprise, the process of sale of bank loans lacked transparency.

In such a case, for valuation of the properties of the sick unit, the government would have no option but to depend upon the Asset Reconstruction Company (ARC) and the Resolution Professional appointed for the purpose.

Gehlot stated in most of the cases, the ARC would buy the original bank loans at the lowest payment and file its claims before the Resolution Professional by hiking the loan price manifold. As a result, the ARC would pay a small amount and would become the sole proprietor of all the assets of the sick unit.