The government is working expeditiously on framing rules and regulations for the new Insolvency and Bankruptcy Code, 2015, and will create all administrative structures related to it as “early as possible”, Economic Affairs Secretary Shaktikanta Das said.
“It is a new ecosystem which is being created. It can’t be done overnight. It will take some time but our effort is to do it as expeditiously as possible,” Das told reporters on Thursday.
The finance ministry in a statement also said the new law will give a big boost to ease of doing business in the country by ensuring a quantum leap for the functioning of the credit market. The Insolvency and Bankruptcy Code, 2015, was cleared by Parliament on Wednesday.
The statement added that the Bankruptcy Code “would take India from among relatively weak insolvency regimes to becoming one of the world’s best insolvency regimes”.
“Hitherto India was lacking the legal and institutional machinery for dealing with debt defaults as per the global standards. The recovery proceedings by creditors, either through the Contract Act or through special laws such as the Recovery of Debts due to Banks and Financial Institutions Act, 1993, and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, has not had desired outcomes,” it said.
The new law aims to consolidate the laws relating to insolvency of companies and limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals, presently contained in a number of legislations, into a single legislation and provide for their reorganisation and resolution in a time bound manner for maximisation of value of their assets, it added.
The Code would re-address the powers of borrowers and creditors as well as bring in more transparency in the bankruptcy process, which at present, is fragmented. As per this law, information utilities would be created to provide creditors with information about borrowers such as how much money has been borrowed.