Business Mantra: Faridabad
On 5th May, 2016, Lok Sabha passed a new legislation named “Bankruptcy Law”. It was presented in Lok Sabha in December, 2015. Previously there was no definite process for various types of organizations to declare themselves Bankrupt in case of Insolvency. Like Bankruptcy of Partnership was dealt with according to the provisions of The Indian Partnership Act, 1932 and for companies it was being done according to The Indian Companies Act, 1956 or 2013.
With the introduction of new Bankruptcy code, the new legislation will cover the bankruptcy issue of all the types of organization structures like individuals/proprietors, partnerships, LLPs, companies etc.
Now the bill will be sent to the upper house i.e. the Rajya Sabha. When the bill was introduced in the Lok Sabha, it was referred to the Joint Expert Committee of Both the houses of the Parliament. Hopefully, the bill is set to get passed in Rajya Sabha as the Joint Expert Committee also has Rajya Sabha’s members from various political parties.
The new law aims at bringing a clear and definite process, right from filing of application for Bankruptcy to disposal of assets, satisfaction of liabilities, payment to creditors etc. The new law also aims to make this process easier and faster. According to experts, previously the Bankruptcy process was very cumbersome and used to take 4 years. This period is now expected to get reduced to one year only. So it can be well said that it is an important milestone in the efforts to bring ease of doing business in India. If this insolvency process sets fast then the value stuck in stressed assets will set free in shorter period of time.
If the bill is implemented in fast and correct manner then it will be in the interest of, not only the entity who has applied for bankruptcy but also for lenders, creditors etc. Lot many people who have knowledge and good idea to start and run business. But they do not start their business venture due to fear of losses and after effects like pressures from lenders and creditors or sometimes even physical attacks.
So it will be good for society lenders and aspiring business men all. Even global investors will now feel that legislation is there only proper implementation is required.