The legislation to enable easy exit of a loss-making business enterprise was on Wednesday referred to the Joint Parliamentary Committee (JPC). Efforts were made by the BJP-led NDA government to pass the Insolvency and Bankruptcy Bill, 2015, in Lok Sabha on the last day of Winter Session, but gave in to the pressure from opposition.
Earlier on Wednesday, the Lower House approved the motion moved by Union Finance Minister Arun Jaitly to send it to JPC. Joint Parliamentary Committee will have 20 members (10 from each house) and will examine the bill, as introduced in Lok Sabha and give report by the last day of the first week of the budget session of parliament in 2016.
On Monday, the Congress party had opposed the introduction of the bill over DDCA controversy. It was, however, tabled after an approval from the house through voice vote.
Economic Affairs Secretary to Finance Minister, Shaktikanta Das had termed the bill as “the biggest reform Next to GST” sharing his view on the micro-blogging site Twitter on Tuesday.
“An effective legal framework for timely resolution of insolvency and bankruptcy would support development of credit markets and encourage entrepreneurship and it would also improve ease of doing business, and will facilitate more investments leading to higher economic growth and development,” the government had said detailing the provisions of the bill in Lok Sabha.
Insolvency and Bankruptcy Act also allows the companies failing to pay back debts to the funding agencies to appoint insolvency professionals who will help the company revive its finances.
“A Formal bankruptcy law will provide definite time period within which a company can plan exit… this is in the right direction, foreign companies need a clear cut entry and exit policy for their investments,” S. Ramaswamy, former president Indian Corporate Counsel Association had said.
The law process a timeline of 180 days to deal with insolvency and enable winding-up of operations of a company with an extension of 90 more days. Debt Recovery Tribunal will act as an adjudicating authority for individuals and partnership firms and the National Company Law Tribunal will be the authority for companies.
The law will also facilitate establishing information agencies to collect and collate financial information from the listed companies and their creditors.