Establishment of Insolvency Regulator, Insolvency Adjudicating Authority, and Insolvency Information Utilities are among the recommendations of the Bankruptcy Law Reform Committee made to the central government on Wednesday.
In the report submitted to union Finance Minister Arun Jaitley, the committee also made various other recommendations including fast tracking of insolvency proceedings, regulation of professionals/agencies involved in insolvency, an official statement said.
The report, submitted by chairman of the Bankruptcy Law Reform Committee T.K. Viswanathan, the former law secretary, to Jaitley also framed the draft Insolvency and Bankruptcy Bill, consolidating the existing laws relating to insolvency of companies, limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals.
According to the committee, the enactment of the proposed Bill will provide greater clarity in the law.
It will also facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt and address the challenges being faced for swift and effective bankruptcy resolution.
The Bill seeks to improve the handling of conflicts between creditors and debtors, avoid destruction of value, distinguish malfeasance vis-a-vis business failure and clearly allocate losses in macroeconomic downturns.
The Viswanathan committee was set up after Jaitley in his 2015-16 budget speech said the bankruptcy law reform is a key priority for ease of doing business in the country.
The committee report has been uploaded on the finance ministry's website for public comments by November 19, 2015.
After taking the suggestions/views into consideration, the government will take a final decision on the report and introduce the bill in Parliament as early as possible, the finance ministry said.
The committee has recommended Debt Recovery Tribunal (DRT) to be the adjudicating authority with jurisdiction over individuals and unlimited liability partnership firms.
The National Company Law Tribunal (NCLT) shall be the adjudicating authority with jurisdiction over companies, limited liability entities.
The National Company Law Appellate Tribunal (NCLAT) shall be the appellate authority to hear appeals arising out of the orders passed by the Regulator in respect of insolvency professionals or information utilities.
The draft bill proposes to revamp the revival/re-organisation regime applicable to financially distressed companies and limited liability entities; and the insolvency related liquidation regime applicable to companies and limited liability entities.
The draft bill prescribes a period of 180 days for dealing with applications for insolvency resolution. It can be extended for 90 days only in exceptional cases.
The draft bill also provides for a fast track insolvency resolution process- 90-day limit- which may be applicable in certain categories of entities.
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