The Lok Sabha passed the Insolvency and Bankruptcy Code, 2015 aimed at speedy winding up of companies, lower non-performing assets and redeployment of capital for productive uses.
The government accepted all suggestions made by the joint committee on the Code, which sought to keep employees and workers interest on top during bankruptcy. The Joint Committee had recommended that in case of insolvency, interest of the workers should be fully protected and they should be given dues for 24 months as against 12 months proposed in the earlier draft.
Highlights of the bankruptcy code:
Unified Bankruptcy Code:
The government plans to repeal an ineffectual, century-old insolvency law and amend 11 laws currently dealing with defaulters. Once fully implemented, the code would seek to speed up debt recoveries and restructurings by setting a deadline of 180 days to decide the fate of a company that defaults.
The code will apply to companies, partnerships, limited liability partnerships, individuals and any other body specified by the government.
For individuals the process could be initiated either by the debtor or the creditors.
For companies, the resolution process will have to be completed within 180 days, with an extension of up to 90 days if 75 percent of creditors agree.
The process will involve negotiations between the debtor and creditors to draft a resolution plan. If they agree, the plan could be submitted to the authority. If no agreement is reached, the company would automatically go into liquidation.
The process will be managed by a licenced insolvency.
The insolvency regulator would have representatives from government and the central bank, and oversee and regulate insolvency agencies.
The National Company Law Tribunal would under the code address grievances relating to insolvency, bankruptcy and liquidation of companies. Debt Recovery Tribunals would deal with individual cases. Their decisions could be challenged in appellate tribunals and before the Supreme Court.
A debtor could be jailed for up to five years for concealing property or defrauding creditors.