Bankruptcy Law Reforms Committee (BLRC) submits draft Bill on Insolvency

The Finance Minister Shri 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.The Government had constituted a Bankruptcy Law Reform Committee under the Chairmanship of Dr. T. K. Viswanathan, former Law Secretary to look into various Bankruptcy related issues and give its report along with a draft Bill on the subject to the Government.Dr. Viswanathan submitted the Report of the Committee to the Finance Minister Shri Arun Jaitley in his office here today. The Report is in two parts: Volume I – titled “Rationale and Design” and Volume II – titled “Draft Insolvency and Bankruptcy Bill”. The Report, along with a brief summary of the recommendations, has been placed on the website of the Ministry of Finance at www.finmin.nic.in for stakeholder consultation. Comments/suggestions, if any, on the Report may be sent to the OSD (FSLRC & Law), Ministry of Finance, Deptt. of Economic Affairs, Room No. 30, North Block, New Delhi 110001, preferably by email at praveen.trivedi@nic.in by 19.11.2015.After taking the suggestions/views into consideration, the Government will take a final decision on the Report and introduce the Bill in Parliament as early as possible.Following is the Summary of the Recommendations of the Bankruptcy Law Reforms Committee (BLRC)The Report of the BLRC is in two parts:Rationale and Design/Recommendations;A comprehensive draft Insolvency and Bankruptcy Bill covering all entities.The draft Bill has consolidated the existing laws relating to insolvency of companies, limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals which are presently scattered in a number of legislations, into a single legislation. The committee has observed that the enactment of the proposed Bill will provide greater clarity in the law and facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt and will address the challenges being faced at present for swift and effective bankruptcy resolution. The Bill seeks to improve the handling of conflicts between creditors and debtors, avoid destruction of value, distinguish malfeasance vis-a-vis business failure and clearly allocate losses in macroeconomic downturns.The major recommendations of the Report are as follows:Insolvency Regulator:The Bill proposes to establish an Insolvency Regulator to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and informational utilities.Insolvency Adjudicating Authority:The Adjudicating Authority will have the jurisdiction to hear and dispose of cases by or against the debtor.The Debt Recovery Tribunal (“DRT”) shall be the Adjudicating Authority with jurisdiction over individuals and unlimited liability partnership firms. Appeals from the order of DRT shall lie to the Debt Recovery Appellate Tribunal (“DRAT”).The National Company Law Tribunal (“NCLT”) shall be the Adjudicating Authority with jurisdiction over companies, limited liability entities. Appeals from the order of NCLT shall lie to the National Company Law Appellate Tribunal (“NCLAT”).NCLAT shall be the appellate authority to hear appeals arising out of the orders passed by the Regulator in respect of insolvency professionals or information utilities.Insolvency Professionals: The draft Bill proposes to regulate insolvency professionals and insolvency professional agencies. Under Regulator’s oversight, these agencies will develop professional standards, codes of ethics and exercise a disciplinary role over errant members leading to the development of a competitive industry for insolvency professionals.Insolvency Information Utilities:The draft Bill proposes for information utilities which would collect, collate, authenticate and disseminate financial information from listed companies and financial and operational creditors of companies. An individual insolvency database is also proposed to be set up with the goal of providing information on insolvency status of individuals.Bankruptcy and Insolvency Processes for Companies and Limited Liability Entities: The draft Bill proposes to revamp the revival/re-organisation regime applicable to financially distressed companies and limited liability entities; and the insolvency related liquidation regime applicable to companies and limited liability entities.The draft Bill lays down a clear, coherent and speedy process for early identification of financial distress and revival of the companies and limited liability entities if the underlying business is found to be viable.The draft Bill prescribes a swift process and timeline of 180 days for dealing with applications for...

Bankruptcy Law Reforms Committee (BLRC) submits draft Bill on Insolvency

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