The insolvency and bankruptcy code replaced a web of archaic laws, some dating back a years, and helped India jump 30 points to make it to the top countries in World Bank's ease of doing. Nov 27, · In any case, unlike the American law which provides for collective class action suits in similar cases, in India, under IBC, workers can file only individual claims. Resolution Professionals under NCLT have already reported instances of fraud exceeding Rs 40, crore even from among the mere cases they had handled under IBC. The US has a Bankruptcy Code that provides for fairly quick liquidation or reorganisation of business with what is popularly known as Chapter 7, with cases being filed in bankruptcy courts; Chapter 11, which deals with reorganisation of businesses; and Chapter 15, on cross-border insolvencies.
Delaying a decision on whether to shutter a firm or to try to revive it causes destruction of value for all involved. Indian policymakers have recognised this. For banks or lenders, the money recovered can be lent again, promoting efficient allocation of resources, besides development of financial markets such as a bond market with clarity on repayment for debtors. An efficient and swift insolvency regime ensures greater availability of credit or funds for businesses by freeing up capital, and is thought to boost innovation and productivity.
The US has a Bankruptcy Code that provides for fairly quick liquidation or reorganisation of business with what is popularly known as Chapter 7, with cases being filed in bankruptcy courts; Chapter 11, which deals with reorganisation of businesses; and Chapter 15, on cross-border insolvencies.
Individual bankruptcies are dealt with separately. In the UK, once cases are filed for bankruptcies, after 12 months, there is either discharge with part of the assets being used to pay off debts, or, in situations where companies can be turned around, court-appointed administrators handle cases. The German insolvency law is applicable to both individuals and firms, with independent court-appointed insolvency practitioners helping in realising assets or reorganising the business.
A committee headed by former law secretary T K Viswanathan has suggested a timeline of days — extendable by 90 days — to deal with applications for resolving cases of insolvency or bankruptcy.
During this period, the management of the distressed firm or debtor could be placed in the hands of a resolution professional — a new class of professionals equipped to deal with such cases, who would be supervised by a proposed new regulator. Indian city imposes 'triple lockdown' as coronavirus cases surge. Mumbai opens new hospitals as India Covid deaths top 20, Kohli faces conflict of interest probe. China begins pulling back troops near site of India border clash.
India puts back Taj Mahal reopening citing Covid risks. India Bankruptcy Bankruptcy law. Man dies in custody; police say suicide.
Goodbye Asif Farrukhi : Writer, translator, editor, and lover of fine literature. Suspected Rohingya drug dealer killed in 'gunfight' with BGB. Endangered fishing cat rescued in Sylhet. Four die from electrocution in Narayanganj and Naogaon. Sirajganj boat capsize death toll climbs to 5; 11 still missing.
Three men arrested for abandoning mother on the streets. JU student tests positive for coronavirus. Covid fears: RMG worker's body dumped into water.
Thakurgaon poultry farmers brace for huge loss. Thousands celebrate Eid alongside Saudi Arabia. Cyclone Amphan: Bagerhat suffers losses worth Tk cr. BSF kills Bangladeshi man on Sylhet border. Policeman dies with coronavirus like symptoms in Chittagong. They cannot ensure that the new employer who takes over the sick company would continue the same service conditions. Thus the IBC, while giving some powers with one hand is taking away much more with the other.
Moser Baer is not an isolated case, but as per the data provided by Insolvency and Bankruptcy Board of India IBBI , as on 18 September , of the companies brought under the NCLT have been ordered for liquidation and already the number of workers involved might run into tens of thousands.
The Modi government has put in place an IBC only after being pushed to the edge by the mounting bank non-performing assets and is using IBC only as a blackmail tool to recover some money and has made the banks refer only less than a couple of hundred companies to the NCLT though the list of wilful defaulters itself contains more than companies. For its own political reasons, it might be dealing with the defaulting industry with kid gloves.
But an RBI notification on 12 February directed all banks to recognise a defaulting account the day after the default and start a day process for recovery.
If the process fails, the account was to be referred to the IBC for resolution. So it was expected that a flurry of new references would start from October. So, soon the number of workers affected could run into lakhs. With such a huge time-bomb ticking, the still exceptionally strong Indian trade union movement should come up with innovative proposals to protect the interests of workers under IBC.
Photo credit: Hindustan Times. Notify me of follow-up comments by email. Notify me of new posts by email.