Warning! Credit card companies can drag you to court for unpaid bills, loans as small as Rs 10,000
The central government is considering bringing individuals as well as partnership firms under the Insolvency and Bankruptcy Code (IBC). So far, only corporate debtors can face the bankruptcy proceedings initiated by the banks. We are recommending that it (amount in case of individual loans) should be made Rs 10,000, said Ministry of Corporate Affairs (MCA) Secretary Injeti Srinivas.
Soon, the credit card companies will be able to drag the individuals to courts over an unpaid bill or a personal loan of as little as Rs 10,000. The central government is considering bringing individuals as well as partnership firms under the Insolvency and Bankruptcy Code (IBC). So far, only corporate debtors can face the bankruptcy proceedings initiated by the banks. “We are recommending that it (amount in case of individual loans) should be made Rs 10,000,” said Ministry of Corporate Affairs (MCA) Secretary Injeti Srinivas. “We will rope in individuals once the Corporate Insolvency Resolution Process (CIRP) is rolled out and properly stabilises,” he said, adding that it will be done in steps.
“The rules for the corporate guarantor should come immediately, followed by the partnership and the proprietorship firms and then the individuals,” the MCA secretary said. The government notifies the related IBC provisions, followed by the rules.
This step is likely to improve the overall credit culture in the country, said another senior official of the Ministry of Corporate Affairs and Finance. “People should know if they have borrowed money, they have to pay it back,” he said. However, “the numbers can really become enormous in the case of individuals. Even a small loan, including crop loan, can come for that matter,” said Srinivas.
“It is good in general, except in the farm loan cases. The sword may be hanging over individual debtor. But the individual creditor will benefit. He will be able to initiate proceedings against the person who fails to return his money, says Ramakant,” a partner at Trilegal. “For banks, the recovery will be time bound and will provide some certainty,” he said.
Currently, there is no bankruptcy law for individuals. Creditors can’t file bankruptcy petition against the individual debtor. “There is no way for an individual to bounce back. This particular framework allows it to happen,” said Sakate Khaitan, a senior partner at Khaitan Legal Associates.
But the government as well as the experts fear the current framework of the courts dealing with it may not be adequate.
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There are 33 debt recovery tribunals (DRTs) dealing with about one lakh cases.
Source: DNA Money
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