CA Bimal Jain
The Government, on Monday, December 21, 2015, introduced the Insolvency and Bankruptcy Bill, 2015 (the Bankruptcy Bill), proposing to enact a single bankruptcy code setting deadlines for processing insolvency cases. Once enacted, not only will it improve the ease of doing business in India, it will also ensure better debt recovery for creditors.
The Bankruptcy Bill will consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interest of all the stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund, the Government said.
Currently there is no single law dealing with insolvency and bankruptcy in India. There are four different agencies i.e. the High Court, the Company Law Board, the Board for Industrial and Financial Reconstruction (BIFR), and the Debt Recovery Tribunal (DRT), having overlapping Jurisdictions, giving rise to potential of systematic delay and complexity in the process. A strong bankruptcy law can help overcome these challenges.
At present, it takes, on an average, more than four years to resolve insolvency in India, according to the World Bank’s Ease of Doing Business Report. The new code seeks to cut down the time to less than a year.
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