Lok Sabha today took up the Bankruptcy Code bill amid demand by some parties for referring it to the Parliamentary Standing Committee, with Finance Minister Arun Jaitley asserting that economic legislation has to go on and the country cannot wait in the “critical” times.
The bill, which proposes to make it easier for insolvent companies to exit business, was taken up after resistance by some opposition parties like Trinamool Congress and BJD whose members argued that they had not got enough time to study the proposed legislation.
Finance Minister Arun Jaitley, while moving the ‘Insolvency and Bankruptcy Code, 2015 Bill’ for consideration and passage, said the country is going through a “critical” phase and “economic legislation has to go on”.
Underlining that the bill was an important legislation, he said it should not “go from committee to committee” as the “country cannot wait” for reforms.
When leaders of Trinamool and BJD resisted, Jaitley said he was willing to refer it to a Joint Committee of Parliament if the opposition could come to any agreement on that but in the meanwhile it should be taken up for discussion.
“We can play these Parliamentary tactics but the world is not going to wait, this country is not going to wait, the economic legislation has to go on,” Jaitley said.
“What is the quick way out by which we can consult everybody, have the wisdom of all the sections and then legislate. Or, is it only an obstacle race where there is one party which wants to create obstacles and my only job is to jump over those obstacles? That is not how a legislation is framed in this country,” he said.
Referring to the demand of the members to send the Bill to a Standing Committee for examination, Jaitley wanted to know what should the government do in case the Rajya Sabha neglects the wisdom of the Standing Committee and the Bill is again referred to a joint committee.
He said it will only mean wastage of time.
Jaitley was referring to the Goods and Services Tax (GST) Bill which is being held up in the Rajya Sabha, though it was first approved by the Standing Committee and later by a Select Committee of the Upper House.
Although it was decided by leaders of various political parties to refer the bill to a Joint Committee, the suggestion was rejected by the Opposition party in the Rajya Sabha and hence a discussion was initiated by Jaitley in the Lower House for its consideration and passage.
Jaitley said the bill was aimed at making the exit easier for companies which cannot run profitably, besides insuring that workers and secured creditors are paid their dues, ahead of tax recovery, in case of winding up of a company.
Members including Saugata Roy (Trinamool Congress), Bhartruhari Mahtab (BJD) and N K Premachandran (RSP) kept on insisting that the Bill be referred to a Parliamentary Committee for examination. Congress members had walked out and were not present during the discussion.
Jaitley said the Bankruptcy Code has ingredients of Money Bill but he wanted it to be discussed in the both the Houses of the Parliament so that it could be improved upon.
“Let me submit that in this Bill, there are ingredients of a Money Bill. But we felt that it is better to have both Houses express their wisdom on it so that if it can be improved upon, the Government is open for it,” he said.
The Bill provides for resolution of insolvency in a timebound manner besides promoting investments, boosting growth and ensuring timely payments of dues to workers and secured creditors by changing the priority for sharing of proceeds following liquidation.
In the order of priority, the first charge will be insolvency resolution process cost to be followed by secured creditors and workers dues for 12 months, unpaid dues to employees other than workmen, unsecured creditors, government taxes for two years, other debts, preference share holds and equity shareholders.
The provision will help the workers get some money in case of closure of a company and the sacrifice will be made by the government, Jaitley said, adding, under the existing system nothing is left after the payment of tax dues.
Jaitley also said the proposed law will help in utilisation of the assets of insolvent companies.
The Bill provides for setting up of a ‘Insolvency and Bankruptcy Board of India’ to regulate professionals, agencies and information utilities engaged in resolution of insolvencies of companies, partnership firms and individuals.
“The Code also proposes to establish a fund to called the Insolvency and Bankruptcy Fund of India…,” said the statement of objects and reasons of the Bill.
As per the proposed legislation, the corporate insolvency would have to be resolved within a period 180 days, extend able by a further 90 days. It also provides for fast-track resolution of corporate insolvency within 90 days.
Currently, there is no single law dealing with insolvency and bankruptcy. Liquidation of Companies is handled by the High Courts, individual cases are dealt with under the Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920.
The other laws which deal with issue include SICA, 1985; Recovery of Debt Due to Banks and Financial Institution Acts, 1993, Sarfaesi Act, 2002 and Companies Act, 2013.
Participating in the discussion, Roy said Jaitley was “acting on rebound” and nothing was new in the Bankruptcy Code.
He said that after losing the Bihar elections, the government came up with policy to liberalise the FDI policy and now it has come up with the Bankruptcy Code as it could not get the GST bill approved by the Rajya Sabha.
He said members received the Bill with over 250 clauses only on Saturday and had no time to go through it and suggested that it should be referred to the Standing Committee for scrutiny.
Jaitley, he said, like a lawyer appears keen to push legislation after legislations.