oppn parties New Bankruptcy Law May Be Passed in the Next Three Days

News Snippets

  • S Jaishankar, Minister of External Affairs, says Pakistan should release and repatriate Kulbhushan Jadhav immediately
  • Karnataka Governor Vajubhai Vala asks the Speaker to hold the trust vote latest by 1.30 pm today
  • The Government sends a list of 24 questions to mobile app company that runs video app TikTok seeking answers for anti-national and obscene content carried on the platform
  • Sarvana Bhawan founder P Rajagopal, serving a life term for murder, dies in a Chennai hospital
  • SC allows time till July 31 to the Ayodhya mediation panel
  • IT department attaches "benami" plot worth Rs 400cr in Noida. The plot allegedly belongs to BSP leader [email protected]@@s brother and his wife
  • Dawood [email protected]@@s nephew, Md. Rizwan Iqbal, was arrested from Mumbai airport as he was waiting to board a flight to Dubai
  • Trouble brews in Bihar JD(U)-BJP alliance as Bihar police asks special branch officers to keep tabs on RSS activities
  • Trust vote in Karnataka assembly today. With rebel MLAs deciding to stay away after the SC order, the Congress-JD(S) government is likely to fall as it does not have the numbers
  • Amit Shah says the government will identify and deport illegal immigrants from all parts of the country
  • Reports from Pakistan confirm that Hafiz Saeed has been arrested and sent to jail
  • After the SC order, Karnataka Speaker says he will go by the Constitution in deciding on the resignations of the 16 MLAs
  • Rebel MLAs say they will not attend the trust vote on Thursday
  • Supreme Court rules that rebel MLAs cannot be forced to attend the assembly and vote in the floor test
  • Both the Centre and the Assam government have sought re-verification of up to 20% of draft NRC data
International Court of Justice agrees with India, stays Kulbhushan Jadhav's execution. It asks Pakistan to allow consular access to the accused.
oppn parties
New Bankruptcy Law May Be Passed in the Next Three Days

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.
The near complete washout of the winter session of Parliament has meant that several important bills have not been taken up. Apart from the now celebrated GST Bill, there was the new bankruptcy law that was to be introduced. The government has announced that it will try to push through this bill in the remaining days of this session and the chances are bright that it will be passed.

The new bill proposes to amend the Companies Act, 2013 in order to allow a secured creditor to start rescue proceedings against a company before an insolvency adjudicating authority if that company fails to pay a debt beyond a certain limit.

In India, it is often seen that by the time creditors start proceedings against a company, it has already turned sick, having eroded more than 50 per cent of its capital. Hence, by proposing early identification of financial distress in a company – a thing which managements refuse to acknowledge – the bankruptcy bill will ensure that timely intervention shall be made to revive the company.

The adjudicating authority must dispose of the applications within 180 days, choosing to extend the same by a further 90 days only in the most exceptional case. It also prescribes that during the resolution period, the management of the company will vest in an administrator or a resolution professional. In case it feels that the company cannot be rescued, it will be liquidated.

Similar kinds of insolvency regimes have been proposed for unlimited liability partnerships and individuals.

If the Parliament manages to clear this bill, it will address a major issue. For long, managements of companies have managed to coerce or grease the palms of bank officials to make them throw good money after bad. In the process, the nation’s financial sector is saddled with mountains of sticky loans in companies that have gone bust despite several infusions of capital. Early detection of financial distress through failure to repay debts in time will reduce this and keep managements on their toes. It will also eliminate the management-bank officer corruption nexus to an extent, while allowing genuinely distressed firms to restructure their companies with professional help.