The Bankruptcy Law Reforms Committee (BLRC) headed by Dr T K Viswanathan on 4 November 2015 submitted its report to the Union Ministry of Finance.
The Report of the BLRC is in two parts- Rationale and Design/Recommendations.
A comprehensive draft Insolvency and Bankruptcy Bill covering all entities. The committee was appointed on 20 October 2014 by the Union Government to provide Bankruptcy Code for firms with focus on small and medium enterprises (SMEs).
It was headed by former Lok Sabha secretary-general and former law secretary T K Vishwanathan.
The formation of the committee is in tune with government’s commitment to introduce an entrepreneur-friendly legal bankruptcy framework and improve ease of doing business.
Key recommendations of the report
Insolvency Regulator: The Bill proposes to establish an Insolvency Regulator to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and informational utilities.
Insolvency Adjudicating Authority: The Adjudicating Authority will have the jurisdiction to hear and dispose of cases by or against the debtor.
The Debt Recovery Tribunal (DRT) and the National Company Law Tribunal (NCLT) shall be adjudicating authorities over individuals and unlimited liability partnership firms and companies and limited liability entities respectively.
NCLAT shall be the appellate authority to hear appeals arising out of the orders passed by the Regulator in respect of insolvency professionals or information utilities.
Insolvency Professionals: The draft Bill proposes to regulate insolvency professionals and insolvency professional agencies. Under Regulator’s oversight, these agencies will develop professional standards, codes of ethics and exercise a disciplinary role over errant members leading to the development of a competitive industry for insolvency professionals.
Insolvency Information Utilities: The draft Bill proposes for information utilities which would collect, collate, authenticate and disseminate financial information from listed companies and financial and operational creditors of companies.
Significance Draft Insolvency and Bankruptcy bill
The draft Bill has consolidated the existing laws relating to insolvency of companies, limited liability entities, unlimited liability partnerships and individuals which are presently scattered in a number of legislations, into a single legislation.
The proposed Bill will provide greater clarity in the law and facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt.
The bill further seeks to improve the handling of conflicts between creditors and debtors, avoid destruction of value, distinguish malfeasance vis-a-vis business failure and clearly allocate losses in macroeconomic downturns.