The Bankruptcy Code- Will it prevent the Encore of Affair la Vijaya Mallaya??????

Prof. Soman Nambiar

Sr. Professor,

School of Management,

Presidency University, Bengaluru

The Bankruptcy Code is touted as the next most significant reform to hit India post the Goods and Services Tax Reforms. Per statistics released by the World Bank recently credits India with the taking on an average of 4.3 years to resolve an Insolvency related issue through the judicial process. This is twice as long as it takes in China. For the record, though only time will tell, the Bankruptcy Code is expected to lower this dubious record to less than a year. Compounding this is the frightening finding that on an average only 25% of the delinquent accounts are recovered, amongst the lowest in the world

Per the prevalent law governing insolvency management, even to decide to whether to save the troubled company or to liquidate it takes years paving the way for the management to divert wealth from the company. But the proposed Code envisages resolution of the issue within 180 days if not 90 days under a fast track disposition. Either way the management is replaced by Insolvency Professionals

The legislation as it is in vogue now, is oriented and geared towards reviving sick and delinquent companies. This, results in appeals being preferred, post order for winding up of company. The proposed Code frowns upon revival of delinquent company as the only recourse

The new Bankruptcy Code does away with Official Liquidators and instead conceives of highly specialised Registered Insolvency Practitioners working at tandem with a Regulatory Body under the overall supervision of the Company Law Tribunal

This Insight into the Bankruptcy Code is expected to go a long way to increasing the Credit Rating of the India Banking Sector, in particular and the Indian Economy, as a whole, in general

Lets discuss the features of the ‘Insolvency and Bankruptcy Code, 2015’ in the next Blog