Parliamentary panel approves insolvency laws, sets stage for passage
Arun Jaitley says the insolvency and bankruptcy code could come up for passage in the current session of Parliament that ends on 13 May
New Delhi: An Indian parliamentary panel approved a bill aimed at overhauling century-old bankruptcy regulations, taking a key reform measure aimed at improving ease of doing business closer to implementation.
The Insolvency and Bankruptcy Code, which makes it easier to wind up a dying company or recover dues from a defaulter, could come up for passage in the current session of Parliament that ends on 13 May, finance minister Arun Jaitley said. The panel comprises members from opposition parties apart from ruling party lawmakers.
The bankruptcy code is key to fulfilling Prime Minister Narendra Modi’s poll promise of improving ease of doing business in India and revive the government’s stalled reform agenda. World Bank data show that creditors in India recover about 25.7 cents on the dollar in the 4.3 years it takes to resolve insolvency compared with 80.4 cents in the US in less than half that time, which deters lending and investment.
Kingfisher Airlines, whose founder Vijay Mallya is now under pressure from authorities to return to India and pay Rs9,000 crore of dues to banks, is the latest example of how the existing web of complex insolvency laws is affecting companies and lenders. Mallya, who is now in London, has said he isn’t a “wilful defaulter" and was making efforts “in all sincerity" to repay loans.
The legislation proposes an insolvency regulator, lays down the procedure for early identification of financial distress in companies, and prescribes time-lines for their revival or shutting down. Insolvency issues can be dealt with in as little as 90 days and a maximum of 270 days.
Jaitley had introduced the legislation in December before it was referred to the parliamentary panel. Modi, whose 2014 election win was cheered by investors looking for quick economic reform, has since back tracked on a key legislation aimed at making land acquisition easier while the national sales tax remains stuck in Parliament due to a blockade by opposition parties. Bloomberg
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