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 firstname.lastname@example.org 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:
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:
Transition Provision: The draft Bill lays down a transition provision during which the Central Government shall exercise all the powers of the Regulator till the time the Regulator is established. This transition provision will enable quick starting of the process on the ground without waiting for the proposed institutional structure to develop.
Transfer of proceedings: Any proceeding pending before the AAIFR or the BIFR under the SICA, 1985, immediately before the commencement of this law shall stand abated. However, a company in respect of which such proceeding stands abated may make a reference to Adjudicating Authority within 180 days from the commencement of this law.