The need to pass the New Bankruptcy Law for overhauling sick businesses is amongst the most important pieces of legislations that needs to be cleared by Parliament.
Delay in revival, puts pressure on banks, which are not able to get their dues and has been a long standing problem.
The New Bankruptcy Law is to be introduced in the Winter Session of Parliament. If passed, it would be great news for the industry and bankers in particular. Most of the prevailing laws are extremely old and are outdated.
The one good thing about the law is that people who took advantage of delays, due to the system, may no longer have that advantage. Take a look at what the New Bankruptcy Law could bring in for the industry and creditors.
1) It would reduce the time spent in declaring bankruptcy and put litigation problems to rest.
2) Experts that would form a part of the team to solve problems would be monitored, to avoid malpractice and unwanted support to the promoters.
3) One of the biggest achievements would be to protect creditors. This would be a big boost for the lenders, especially in infrastructure sectors like power, roads, bridges etc., which are saddled with heavy debts. Banks would be the big beneficiaries of the law.
4) Debt Recovery Tribunals would be created to avoid burdening the already overburdened existing courts in the country.
5) The time required to solve issues would be greatly reduced and in line with those that are prevailing abroad.
6) There will be an Insolvency Adjudicating Authority, which will hear all existing cases by or against debtors.
7) Time taken to solve bankruptcy cases in India is around 4.3 years. This should come down to well below 2 years.
There is little doubt that the new Bankruptcy Bill is a good one and would cut down on the time taken to declare insolvency and recover dues. If passed in both the houses, it would be music to the ears of our bankers.
However, the government would have to ensure some support and should be able to convince both the houses on its passage. Thus far there has been no much opposition to the Bill. To become a law it needs to pass through both the Lok Sabha and the Rajya Sabha.
At the moment the government seems focussed on the GST Bill. But, one is hopeful that the Bankruptcy Bill would also go through in the Winter session of parliament.