Fine tuning the Bankruptcy Code ahead of its consideration and passage, a parliamentary panel has recommended to keep dues to social security funds out of liquidation process, payment of 24 months outstanding dues of workers and bring overseas assets of bankrupt firms under the proposed law.
The Joint Committee on the Insolvency and Bankruptcy Code, in its report tabled in Parliament on Thursday, also suggested to shorten the time lines proposed in the bankruptcy code for completion of various processes for liquidation and bankruptcy of insolvent firms.
The panel said in case of insolvency, interest of the workers should be fully protected and they should be given dues for 24 months as against 12 months proposed in the Bill. “All sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund should not be included in the liquidation estate assets and estate of the bankrupt,” it said. The panel suggested the change after the Employees Provident Fund Organization and the Pension Fund Regulatory and Development Authority strongly argued that old age security funds should get priority over all other debts including secured creditors.
Further, panel said that the personal ornaments beyond a certain value should not fall under the category of as excluded assets to ensure that the debtors get their money back.
Finance minister Arun Jaitley had said on Wednesday that the joint committee has cleared the Code, a major ease of doing business initiative, which is likely to be discussed in the current Budget session of Parliament.
With no provisions to deal with the issues relating to cross-border insolvency due to complications involved, the panel said, “the cross- border insolvency cannot be ignored for too long if India is to have a comprehensive and long lasting insolvency law as the Code aims to achieve.” After consultations with the finance ministry, the panel suggested insertion of two new sections in the bill which would require India to enter into pacts with foreign countries to recover the overseas assets of defaulting companies.
The new code is among the steps being taken by the government to deal with the massive bad loan problem in the public sector banks. The proposed law proposes a timeline of 180 days, extendable by another 90 days, to resolve cases of bankruptcy.
The draft Bill was prepared on the basis of the recommendations from the Bankruptcy Law Reform Committee, headed by former law secretary TK Viswanathan. The committee had submitted its report along with a draft Bill in November 2015, following which it was tabled in the Lok Sabha on December 21.
Parliament panel says
* Bring overseas assets of insolvent firms under Bankruptcy Code
* Pay bankrupt firms’ workers dues for 24 months instead of 12 months
* Do not include debtor’s dues to retirement funds in the liquidation assets
* Cut the timeline for various processes in liquidation process
