Bankruptcy committee

The government-appointed Bankruptcy Law Committee recently submitted its report and its proposed Insolvency and Bankruptcy Bill to the government.

• The 15-member committee was headed by T K Vishwanathan, a former Lok Sabha secretary-general.
• 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.

Proposed draft bill:

• The draft Bill has consolidated the existing laws relating to insolvency of companies, limited liability entities, unlimited liability partnerships and individuals which are presently scattered in a number of legislations, into a single legislation.
• 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 Bill suggests an insolvency regulator, for oversight over professionals in this regard. It also lays down a transition provision during which the central government will exercise all the powers of the regulator till the time one is set up.
• The Bill recommends the existing Debt Recovery Tribunals be the adjudicating authority for individuals and unlimited liability partnership firms. And, that the National Company Law Tribunal be the one for companies and limited liability entities. It also proposes setting up of information utilities, to collect and collate financial information from listed companies and their creditors.

Background:

• The Finance Minister 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.
• Accordingly, the Government had constituted the Bankruptcy Law Reform Committee to look into various Bankruptcy related issues and give its report along with a draft Bill on the subject to the Government.

The Government will shortly take a final decision on the Report and introduce the Bill in Parliament.

sources: pib, toi.