Bankruptcy Code to help India Ease of Doing Business
Bankruptcy Bill was introduced in the Parliament with an aim to help address the issue of bank debts and also to improve India's ranking for ease of doing business. Both the Houses of the Parliament passed it. It will become a law once President signs it.
Experts are of the opinion that the bankruptcy code will help lenders recover their money as they will be able to set a deadline of 180 days for companies to pay back the loan or go for liquidation.
The code is of prime importance to India as on the yardstick of resolving insolvency, India is ranked at lowly 136 among 189 countries. As per the World Bank currently it takes more than four years to resolve a case of bankruptcy in our country. Thanks to this code the time will be reduced to less than a year.
M R Umraji, the adviser to the Indian Bank's Association hailed the code by saying that this code will put company promoters on guard and they will now think twice before they default.
People expect that the bill will discourage big corporates from defaulting and banks also will not be in a pitiable condition while recovering loans from big businesses.
Some experts believe that the code can help unlock billions of dollars which are like dead investment in the sick business units. However, they also believe that as legal system of India is very cumbersome it may not be easy to implement the code once it becomes law.
Highlights of the Code:
The
Code
to
create
time-bound
processes
for
insolvency
resolution
of
companies
and
individuals.
The
processes
to
be
completed
within
180
days.
Should
insolvency
not
be
resolved,
the
assets
of
the
borrowers
to
be
sold
to
repay
creditors
The
resolution
processes
to
be
conducted
by
licensed
insolvency
professionals
(IPs).
The
IPs
to
be
members
of
insolvency
professional
agencies
(IPAs).
IPAs
to
also
furnish
performance
bonds
equal
to
the
assets
of
a
company
under
insolvency
resolution
Information
utilities
(IUs)
to
be
established
to
collect,
collate
and
disseminate
financial
information
to
facilitate
insolvency
resolution
The
National
Company
Law
Tribunal
(NCLT)
to
adjudicate
insolvency
resolution
for
companies.
The
Debt
Recovery
Tribunal
(DRT)
to
adjudicate
insolvency
resolution
for
individuals
The
Insolvency
and
Bankruptcy
Board
of
India
to
regulate
functioning
of
IPs,
IPAs
and
IUs