The Finance Minister Arun Jaitley on Monday introduced in Lok Sabha a Bill that would pave the way for complete overhaul of current insolvency and bankruptcy system in the country.
This Bill -- Insolvency and Bankruptcy Code 2015 -- was introduced in the lower house only after the Speaker Sumitra Mahajan rejected opposition demands that introduction of the Bill be deferred to some other date.
Member of Parliament NK Premachandran --who objected to the introduction of the Bill -- contended that the Bill was defective and therefore could not be introduced.
The new bankruptcy code is significant as it seeks to ensure insolvency resolution of corporates and individuals in a time bound manner.
The Bill on bankruptcy code has fixed a timeline of 180 days, extendable by another 90 days, for resolving cases of insolvency or bankruptcy.
The current system is marred by delays. It takes anywhere between five to 15 years for lenders to recover money in the event of default.
Legal experts point out that parallel proceedings before different forums (courts, debt recovery tribunals) often led to conflicting views and caused delays in resolving debt related issues for lenders.
It is widely believed that an overhaul of the bankruptcy system in the country would help India improve its ‘Ease of Doing Business’ rankings.
The new bankruptcy code has recommended the setting up of an “insolvency regulator” to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and informational utilities.
Besides recommending a separate insolvency regulator, the T K Viswanathan-headed Committee on Bankruptcy law reforms had in its report last month suggested an easier route to deal with individual bankruptcy.