The FICCI was giving a response a day after the Rajya Sabha had passed a new bankruptcy code.
Advertisement
For most of the offences, the penalty will be imprisonment of up to six months, or a fine of up to five lakh rupees, or both.
The Code repeals the Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920.
Presently, recovering money from a defaulted corporate borrower is a nightmare for bankers since it takes years for the Debt Recovery Tribunals (DRTs) to finish the litigation. The IRP is overseen by an Insolvency Professional (IP) who is given substantial powers.
The proposed legislation seeks to amend a plethora of laws including India Partnership Act of 1932, Central Excise Act of 1944, Customs Act of 1962, Income Tax Act of 1961, the Recovery of Debts due to Banks and Financial Institutions Act of 1993, SARFAESI Act of 2002, Sick Industrial Companies Repeal Act of 2003, Payment and Settlement Systems Act5 of 2007, Limited Liability Partnership Act of 2008 and Companies Act of 2013. They would be regulated by “Insolvency Professional Agencies”.
“The passage of this Bill will establish an entrepreneur-friendly legal bankruptcy framework for speedy, efficient and consistent resolution of insolvencies for companies and individuals”, he said. In order to develop the credit market in India, in case of liquidation, financial debts owed to unsecured creditors have been kept above the Government’s dues in the list of priorities (waterfall).
Information utilities (IUs) will be established to collect, collate and disseminate financial information to facilitate insolvency resolution.
“We have outdated laws with respect to bankruptcy code and the existing regime is considered to be inadequate”, he said, adding it is hard in the present system to deal with a plethora of laws and debt restructuring is a major issue today. “It sets the time limit for the insolvency resolution to 180 days, thereby allowing lenders to take decisions on the sustainability of the business”, said Vikram Babbar, Executive Director, Fraud Investigation & Dispute Services, E&Y.
“This is a good beginning”. It is important that it brings about structural changes and broad-based consensus. It will also enable workmen to initiate the insolvency process and strengthen rights of creditors.
The Federation Chambers of Commerce and Industry (FICCI) on Thursday said that the passage of the Bankruptcy Bill is a ideal example of constructive cooperation in parliament towards economic progress.
Advertisement
Naresh Agrawal (SP), Vivek Gupta (TMC), Tapan Kumar Sen (CPI-M) also spoke on the bill.
