Revision as of 19:22, 19 September 2017

2016: Parliament passes comprehensive bankruptcy code

The Times of India, May 12 2016

Insolvency code to ease closure of sick units gets House nod

Parliament passed a comprehensive bankruptcy code, a longpending grudge with international investors, which will help speed up closure of unviable companies and revival of viable entities.

The lack of a bankruptcy code is one of the key reasons for India ranking low on the ease of doing business rankings, since it takes several years to wind up a business. Currently , there are a dozen laws dealing with various aspects of sickness and closure, and the one related to insolvency is over a century old.

Through the new law, which was cleared by the Rajya Sabha on Wednesday evening, the government is trying to put in place a speedy process for early identifi cation of financial stress and resolve the strain if the business is found viable. It has stipulated a time-bound revival. The new law comes at a time when lenders are dealing with a record pile of bad debt, for which the government has also sought to amend existing laws to make recoveries smoother.

“The essential idea of the new law is that when a firm defaults on its debt, control shifts from the shareholderspromoters to a committee of creditors, who have 180 days in which to evaluate proposals from various players about resuscitating the company or taking it into liquidation. When decisions are taken in a time-bound manner, there is a greater chance that the firm can be saved as a going concern, and the productive resources of the economy (the labour and the capital) can be put to the best use. This is in complete departure with the experience under the SICA (Sick Industrial Companies Act) regime where there were delays leading to destruction of the value of the firm,“ the finance ministry said in a statement.

The new system provides for two processes for resolution of individual cases -fresh start and insolvency resolution.

It also puts the dues of the employees at the top of the pile with certain creditors getting preference over the government. In addition, it provides for powers to acquire overseas assets of a defaulter, for which the government has to sign global agreements.

FM seeks opposition support for GST

New Delhi: FM Arun Jaitley on again urged Congress to support the bill that seeks to amend the Constitution for the introduction of goods and services tax (GST) after the principal opposition party suggested it would offer support, provided its three key recommendations are accepted.

“For heaven's sake, I beseech you in the interest of Indian democracy not to go on this misadventure (judge-headed panel)...With the manner in which encroachment of legislative and executive authority by India's judiciary is taking place, probably fi nancial power and budget making is the last power that you have left. Taxation is the only power which states have,“ he said during the debate on the finance bill in the Rajya Sabha.

The minister said it was “wholly misconceived“ for any political party to hand over the taxation power to judiciary . Jaitley asked Congress to “reconsider“ its stance on GST, which is held up as Congress wants the government to specify the GST rate in the bill, provide for an independent dispute resolution mechanism, and drop the plan for an additional 1% levy by manufacturing states.