KOLKATA, 12 January: Bankruptcy code will reduce people’s dependence on bank finance, said Dr M S Sahoo, Chairman of the recently-constituted Insolvency and Bankruptcy Board of India.
In a bid to ensure greater ease of doing business, the Board is focusing on time-bound resolution for insolvency and exit, Dr Sahoo said at the inaugural session of the Conference on Insolvency and Bankruptcy Code 2016: Impact Analysis organized by CII Eastern Region here today.
The whole exercise is sought to be driven by market, not the Government, Dr Sahoo told a large assembly of MDs, CEOs, CFOs, company secretaries, chartered accountants, finance & tax professionals, corporate advisers, cost accountants, law firms & consultants, asset reconstruction companies, financial institutions coming from across the country.
“In our vision, the state’s job is to create a mechanism which will support a system which will let the market have its way and deliver,” he said, adding that improving the ease of doing business is all about allowing businesses to granting a freedom of choice. “That explains why we have moved to a model which is inclusive and participatory where the market takes the call, not the state,” he explained.
Mr Sahoo also said Insolvency and Bankruptcy Board of India is working on a framework for direct liquidation bypassing Insolvency resolution. “We will come out with the framework for voluntary liquidation approach that is direct liquidation by February end or March,” he said.
A company has to apply to National Company Law Tribunal to begin the process on the code, he said. The board has selected 974 Insolvency professionals on a temporary basis for six months and begun a certification test for being a regular professional, he added.
On the recommendations of the Parliamentary Joint Committee on Insolvency and Bankruptcy Code, the Board has decided not to recommend any Insolvency professionals and instead will be decided by creditors committee initiating Insolvency action, Dr Sahoo said.
According to Mr Bhupender Yadav, Rajya Sabha MP, the new code will ensure economic freedom which will in turn lead to better economic performance. “As part of the Government’s commitment to promoting a culture of transparency and vibrancy in businesses, the Government is working hard to evolve a culture of making payments. And hence the Code,” Mr Yadav, who headed the Parliamentary Joint Committee on Insolvency and Bankruptcy Code, said at a Special Plenary. The insolvency law caters to workmen, employee, unsecured and secured creditors, he explained. Insolvency will create orderliness of resolution and exit causing low default and more recovery bringing in more projects and improving the ease of doing business with an improvement in the debt market.
Mr M R Umarji, Member, Bankruptcy and Law Committee, spoke of the structural changes brought in the code. “Making payments on time is very critical for trade and industry to grow,” he said. In fact, there is a need for creditors and a company to sit together and find out whether the company is viable or not.
Mr Vijai Pratap Singh, Member, National Law Company Tribunal, explained how the new Code will not only help rid the financial sector of bad-debt problems, but will also enable the banking industry to address stressed accounts.
“The Ministry of Corporate Affairs (MCA) on June 1, 2016 introduced the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT), in place of the Company Law Board (CLB) as per the amendment of the Companies Act of 2013. The NCLT will be a single judicial platform to judge all disputes regarding the affairs of the Indian companies. The objective is to minimize delays in the resolution of disputes, which would serve as a huge relief for the litigants. With the constitution of NCLT, the Company Law Board constituted under the Companies Act, 1956 now stands dissolved. Reports show that around 4,000 cases were transferred to the NCLT after the CLB was dissolved,” he said.
Mr Mahesh Shah, Member, Institute of Cost Accountants of India, lauded CII for orgainsing such an awareness-building conference for all stakeholders. “The code is a milestone for both creditors and companies, he said, adding that the code will ensure quick action to resolve insolvency and bankruptcy.
Earlier in his welcome Address, Mr Vijay Maheshwari, Co-Chairman, CII Eastern Region Economic Affairs, Finance & Taxation Subcommittee & Director, Sumedha Fiscal Services Ltd, said the new Code will strengthen the existing regulatory framework and a new institutional structure, involving insolvency resolution of companies and individuals. The objective of any insolvency procedure is to maximise return to the creditors.
Mr Bijay Murmuria, Director, Sumedha Fiscal Services Limited It would also improve the ease of doing business, said the new Code will eventually lead to more investments bringing about higher economic growth and development.
“It shall serve as a useful tool for creditors and investors, both domestic and international by enabling a better and faster debt recovery mechanism. However, the implementation of the new institutional structure would be a challenge in finally reaping the benefits of the new Code,” he said.
Mr Anil Vaswani, Chairman, CII West Bengal, said the new Code may serve a resolution of the companies and factories which have been closed down for years.
A knowledge paper titled “The Insolvency and Bankruptcy Code 2016- A Step Forward” was unveiled at the inaugural session.
Separate Sessions were conducted with the theme being the “New Legal Framework to Insolvency Resolution”, Impact of Insolvency law on Bond Holders, Investors, LPs” and Impact of Insolvency Law on Banking Landscape.