By Bhupender Yadav
- Recently the Joint Committee, which is dealing with the issue on the Insolvency and Bankruptcy has submitted on the Insolvency and Bankruptcy Code 2015. This is important because the biggest fear before starting business in India is generally to deal with multiple laws, specially in case, if one realizes that the business investment was the wrong choice then one has to deal with the scattered laws.Present government has realized that ease of doing business is not only about convenient entry into the market, it is equally important to have easy exit or restricting of the debt if one realizes that there is less probability to continue with the same setup.
After submission of the Join Parliamentary committee report, the Insolvency and Bankruptcy Code 2016 is before House. It will be important to see what is expected from the Code at the time when Indian market is struggling to handle the issue of bad debt and non repayment etc. It was genuinely expected from the government, which is constantly talking about economic reform as its one of the focus agenda that there must be provision for assurance of getting the money back when creditor has valid reason for withdrawing the money from the investment because such flexibility will encourage investors to invest in Indian market without fear of non-payment.
One of the most important reform this Code is bringing while giving the solution for everything relating to the insolvency and bankruptcy under one legislation. The Code is going to make substantive changes in eleven enactments and repeal few to avoid any conflicting situation. There is also provision to takeaway jurisdiction of the civil court to ensure fast and effective process in timely manner. The Specialised adjudicating authorities like NCLT and DRT are going to be adjudicating authorities to deal with special corporate issue in effective and efficient way.
Code prescribes the time limit for procedures at every stage to ensure the result in 180 days but Code has also taken care the force majeure and made provision of one time extension of 90 days in certain circumstances. There is also provision for fast track option which is in the time limit of 90 days with only one extension of 45 days if necessary because in today’s fast world, its not important that there is law to ensure repayment of debt, it is also important to ensure timely repayment.
This is not all, to ensure effective implementation of the procedure prescribed under that Code, there is provision for establishment of new Board to deal with this specialized matter because the strong Financial Institutions have a major role in sustainability of the economy of any country which is going to be ensured after enactment of the Insolvency and BankruptcyCode in India.
Another unique feature of the code is that it gives right to operational creditor to initiate procedure and the right is not limited to big creditors only who can say that they want their money back, the operational creditor also have saying in the procedure. Workmen and other employees have priority as per this Code. This Code is here to say that enough playing around with scattered laws and living a lavish life with unlimited debt, now there is a limit of waiting for repayment of debt. In short, either re-structure, repay or windup.
One of the new and unique feature of this Code is to establish an Information Utility for collection of all authentic information at one place. It is a new concept in India, which is going to facilitate one to check the information before investing and consequently going to become an aid to ensure one’s investment is secured. Information Utility will collect, collate, authenticate and disseminate financial information to facilitate insolvency, liquidation & bankruptcy.
The Code makes provision for the creation of a class of professionals, who will be specialized in dealing with such matters and will be accessible to the persons who need it because they will be registered with the agency as ‘Insolvency Resolution Professionals”, they are the professionals, who will ensure an efficient, effective and professional handling of repayment of debt.
One of the most important challenges before investors was to deal with the situation where one has bad debt in India but the property was situated outside Indian jurisdiction. The code has made provision to tackle issues of cross border insolvency. If one cannot replay their debt then the asset situated outside Indian territory can also be considered and used for repayment if the Indian property is not sufficient. For this purpose two provisions are included but details may come in subsequent rules as this issue requires cooperation of the other country and detail procedures to execute it. In short, creditors are secured in India and the time has come for a new economic era, where India is going to attract investors more than ever.
(Writer is M.P. Rajya Sabha
Chairman, JPC on Bankruptcy and Insolvency Code)