The Lok Sabha has passed the much awaited resolution regime or what is known as the bankruptcy code for the corporate sector. The bill titled as the Insolvency and Bankruptcy Code 2015, expected to go through the upper house smoothly, will facilitate speedy and healthy settling of unviable firms.
India so far only fractured clauses in several Acts like bankruptcy proceedings in India are governed by multiple laws — the Companies Act, SARFAESI Act, Sick Industrial Companies Act etc to settle the bankruptcy issues.
Absence of right procedures means corporate are not able to wind up a sick companies’ operations before its financials getting worsened. Here, all concerned, the shareholders, management, creditors etc. face problems of their own.
The new bankruptcy code will replace the existing bankruptcy laws and cover firms, limited liability partnerships, partnership firms and individuals.
Pointing out the remarkable feature of the law, Minister of State for Finance Jayant Sinha said the law restores the balance of power between promoters and creditors. “There were 12 laws, some of which were more than 100 years old, to tackle insolvency, and now there will be one law. We will be able to quickly move up the World Bank rankings.”
Corporate insolvency situation goes unending and without proper facilitation in India at present ending in financial disasters and governance failures at present because of the absence of proper law.