On Wednesday, Rajya Sabha passed the Bankruptcy code 2016. That will make it much easier to do business in India.
Once the President of India, Mr. Pranab Mukherjee signs the legislation, from that time India will have a new Bankruptcy law that will make sure time-bound settlement insolvency. It will create a database of serial defaulters and enable faster turnaround of businesses.
Analysts say- implementation will remain the key As the new code is indicated on the creation of eco-system including information utilities, insolvency professional, and a bankruptcy regulator.
In India, along with the proposed changes, enforcement laws, and two debt recovery, It will be serious in resolving India’s bad debt problem.
Last week Bill was passed by the Lok sabha, which is received by the Rajya sabha on Wednesday. This Legislation is supported by the majorities of the parties in both houses, after all, the amendments forward by a joint parliamentary committee were accepted by the government.
The new code will cover individuals, companies, partnership firms, limited liability partnerships and replace existing bankruptcy law. It will change the law (including Companies Act) to become legislation to deal with insolvency and also help creditors to recover the loan faster.
It also helps India to move up from its current rank of 130 in the world bank’s ease of doing business index, since all reforms undertaken by 31 may are incorporated in the next ranking.
India is ranked 136 among 189 countries, On the parameter of resolving insolvency. According to the World bank , In India, at present it takes more than four years to resolve a case of bankruptcy.
The bill introduced the evolution of a new class of insolvency professional that will expert in helping sick companies and provide for the creation of information utilities. The bill introduced to set up the Bankruptcy and Insolvency Board of India to act as a regulator of these professional and utilities.
To address corporate insolvency and individual insolvency, the existing infrastructure of National Company Law tribunals and debt recovery tribunals proposes to use.
Through bilateral agreements with other countries, the bankruptcy code has provisions to address cross-border insolvency. It also introduced time frames for every step in the insolvency process- appeals in the debt recovery tribunals, National Company Law Tribunals and courts and right from filing a bankruptcy application to the time available for filing claims.
Earlier, it was six months, but now Bankruptcy applications have to be filed within three months.
To protect workers’ interests:
The code has provisions to ensure that the money due to employees and worker from the provident fund, the pension fund, and gratuity fund shouldn’t be included in the estate of the bankrupt company.
There are also the provision, from holding public office, if anyone declared bankrupt- as a result of that government officials and politicians can’t hold any public office.
Minister of state for finance Jayant Sinha, who are the most vulnerable, the code seek to protect the interest of workers. He said- Workmen will be the first in line to get the proceeds of liquidation and it enables workmen to initiate the insolvency process.