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

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  • In reply to a question in Parliament, the government says it is empowered to lawfully intercept, monitor or decrpyt information stored in a computer resource in the interest of sovereignty or integrity of India
  • Police stop a 12-year old girl on her way to the Sabarimala shrine
  • In Karnataka, the JD(S) indicates that it might support the BJP government if it falls short of numbers after the bypolls
  • Congress pips the BJP in local body elections in Rajasthan, winning 961 wards to the BJPs 737
  • After Airtel and Vodafone-Idea, Jio also indicates that tariffs will be raised from December
  • Sources in Shiv Sena say that they might revive the alliance with the BJP if it offers the 50:50 deal
  • A miffed Sanjay Rout of the Shiv Sena says that it will take "100 births" to understand Sharad Pawar
  • Mobile operators Vodafone-Idea and Airtel decide to raise tariffs from next month
  • Sharad Pawar meets Sonia Gandhi and says more time needed for government formation in Maharashtra
  • Justice S A Bobde sworn in as the 47th Chief Justice of India
  • Supreme Court holds hotels liable for theft of vehicle from their parking area if parked by valet, says "owner's risk" clause is not a shield from such liability
  • Finance Minister says she is receiving feedback from many sectors that recovery is happening as there is lower stress
  • Sabarimala temple opens, but police bar the entry of women below 50 years
  • Finance Minister Nirmala Sitharaman says Air India and BPCL to be sold off by March
  • Media person Rajat Sharma resigns as DDCA president
Two Muslim litigants in Ayodhya refuse to accept the Supreme Court order, say review petition might be filed
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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.