Bankruptcy Code a 'game changer' reform for distressed companies: Arun Jaitley

Terming the Insolvency and Bankruptcy Code Bill a "game changing" reform, the Finance Ministry on Wednesday said it will help timely revival of companies facing financial distress and make India a more attractive investment destination.

The Insolvency and Bankruptcy Code Bill, seeking to update and consolidate existing laws, was passed on Wednesday by the Rajya Sabha. The Lok Sabha had cleared it last week.

"Bankruptcy code: Will make India a more attractive investment destination and greatly improve ease of doing business," Economic Affairs Secretary Shaktikanta Das tweeted.

Terming it as a "huge and game changing reform measure", Das said the Code creates framework for timely revival or resolution of companies in distress and will help all stakeholders.

With the passage of the Code by Parliament, there would be one law dealing with bankruptcy while doing away with at least 12 different legislations, some of which are centuries old.

"Bankruptcy code: it's a big day for economic reforms in India. The country moves ahead towards higher growth," he said, adding it will also promote entrepreneurship and innovation.

As per this law, information utilities would be created to provide creditors with information about borrowers such as how much money has been borrowed.

The information utilities would be regulated by the bankruptcy board and the information would be "almost real time".

Minister of State for Finance Jayant Sinha tweeted: "History is written today as Rajya Sabha passes Bankruptcy Bill! Thank you to MPs and officers who worked on the bill". 

The Code will ensure clear, coherent and speedy process for early identification of financial distress and and resolution of companies and limited liability entities if the underlying business is found to be viable, the statement said.

Under the law, there would be two distinct processes for resolution of individuals, namely- Fresh Start and Insolvency Resolution.

Also, Debt Recovery Tribunal and National Company Law Tribunal will act as Adjudicating Authority and deal with the cases related to insolvency, liquidation and bankruptcy process.

"The Insolvency and Bankruptcy Code is a comprehensive and systemic reform, which will give a quantum leap to the functioning of the credit market," the ministry said.

It would take India from among relatively weak insolvency regimes to becoming one of the world's best insolvency regimes.

"It lays the foundations for the development of the corporate bond market, which would finance the infrastructure projects of the future," it said.

The passing of this Code and implementation of the same will give a big boost to ease of doing business in India, it added.

With the passage of the Code by Parliament, there would be one law dealing with bankruptcy while doing away with at least 12 different legislations, some of which are centuries old.

"Bankruptcy code: it's a big day for economic reforms in India. The country moves ahead towards higher growth," Das said, adding it will also promote entrepreneurship and innovation.