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Last updated: 28 Nov, 2017  

Bankruptcy.Thmb.jpg Insolvency ordinance

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Bikky Khosla | 28 Nov, 2017
The Union Cabinet last week approved certain changes to the Insolvency and Bankruptcy Code and afterwards an Ordinance was soon moved and finally it was approved by the President. No doubt, these new norms -- blunt and unforgiving -- have enough potential to change the banking credit culture of the country. The ordinance provides for a single-window, time-bound process for revival or liquidation of a company. The government claims that the new legislation is designed to prevent unscrupulous, undesirable persons from misusing the provisions of the Code.

The Indian economy is sitting on a huge pile of bad loans, amounting to Rs 9.5 lakh crore, and beyond doubt this has happened because defaulters were not dealt strictly in the past. Examples abound how promoters tried to capitalise on the loophole that allowed promoters to re-purchase their stressed assets at a discounted price. It is also alleged that many a time bankers resorted to foul play by providing additional funding to defaulters to repay previous loans. Additionally, it is quite evident now that most banks have failed to do much to prevent their bad loans from piling up.

As per the new Code, wilful defaulters, undischarged insolvents, disqualified directors under the Companies Act, SEBI-banned persons, etc. are banned from bidding for bad assets. There is not much disagreement over this provision. But the Ordinance also disqualifies a person who executed enforceable guarantee in favour of a creditor in respect of an insolvent entity and promoters or sister concerns of companies with non-performing assets. This means promoters related to genuine business failure, and even guarantors of loan repayment of a failed company will not be allowed to bid for bad assets. Merit of this second provision is questioned by many.  

There is little doubt that the new Insolvency Code is one of the biggest reforms of recent times. None can deny the importance of reining in the loan cheats. But it is equally important to ensure that genuine promoters who have failed for reasons beyond their control do not suffer. It is good to see that the new Code seeks to guide banks towards a faster resolution, but the question is should they be relieved from judging the promoters to this extent. The sense of urgency the government has shown is welcome, but it has also also ensure that the haste does not lead to injury.

I invite your opinions. 
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RAJIV GARG | Sat Dec 2 06:20:56 2017
It is seen some of Willful defaulters arranged to file suit against him,as & when they will declare Insolvent, they are free to absorb money of private (Non-Govt) suppliers. Advise who have due on such defaulters, how he can get back his money ? When Defualters is caught by Govt through such ordinance, how supplier/creditor may safe & secure for his money ?

Feroz A Wakil | Wed Dec 6 07:22:59 2017
My concern is the effeciency. Wil these changes be enough capable to foresee the next loopholes that could be in plan of new defaulters? Ordinances in the presence of unwiling bankers, won’t work and government will bring in further amendment to this bill after having few more willful defalters havng added few more lakh crores to bad loans.

Insolvency ordinance
Maria Sundara Raj | Thu Nov 30 07:20:32 2017
Great msg. Yours clear msg is seconded by me too. I truly appreciate the initiative taken by CEO, TradeIndia in favour of genuine promotors and the new code should not hurt them.

Bad Loans ..
Anil kant Poddar | Thu Nov 30 02:32:31 2017
No one is genuime who has not paid loan repayment Strict action should be taken against all promoters of abd loans company All are enjoying 5 star life on bank money and no funds to repay to bank All shud be put behind bar amd no facility to be provided to such defaulters by Indan Government If lesson is not taught then the things will continue for ever im some or other way.. Companies are not paying salaries in time but having money to enjoy personal lifes.. Which defaulter company owner is not going in 5 star hotel to enjoy? All shud be screwd without second thought.. Use of credit cards / debit cards saving a/c ; use of flight for travelling shoild be stopped to give them a lesson Poor people have become more poor and rich people who are defaulter has no effect Has any promoters life style has change of Ril ADAG ; Essar ; Bhusan ; Alok Inds Etc ..Answer is NO . All this companies are still asking funds from Bank on the name of running organisation..Bull shit Bankers give them more funds to safe guard self.. All personal welath should be seized immediately. If a normal human being of SSI go for loan then bankers fucked them with mortgage and paper work. FARMERS are dying daily..but banks does not give them any incentives in time Which corporate defaulter has committed Suicide due to default in paymemt?????? Only poor people do suicides as their lives has become hell by bankers and goverment policies.. In last screw all defaluters which will be a lesson for future.

ordinance with regard to IBBI
Daulatram Jain | Wed Nov 29 13:52:38 2017
if challenged in court bound to struck down as cases were referred in july at the instance of RBI and as per IBBI,one yesr has not elapsed since promulgation of natyrally 1 year shall be counted from the date of promulgation of code as this ordinance is with refernce to IBBI addition,now cases r referred once default occurs, so question of one year account becoming NPA does not arise, thereby enabling the same promoters to bid for their assets and take back at bare minimum price. so this ordinance does not stand just and proper in the eyes of law even though objects of this ordinance are laudible.

Bad Loans
Shyam Maheshwari | Wed Nov 29 07:42:23 2017
No one talks about the reasons for increasing bad loans or NPAs. In most of the cases, it is the banks' as well as the government policies which are responsible for loans turning out to be bad esp. in the sme sector.The banks as well as the government deliberately create situations so that the loans become bad at times.

Wonderful decision!
Gaurav | Wed Nov 29 07:18:27 2017
This is one of the best things that Govt could have brought in to stop the crooks from gobbling up the govt/public money. Even a small percentage of this money can do wonders for the farmers of this country. 70,000 Cr for Essar & that too for loss making businesses? Did the promoters stop taking fat salaries? No. Let the loss making companies perish. Let the basics of capitalism prevail as they prevail for the common man in low income & medium income group. Why exceptions?

Insolvency ordinance
Rajaa R K | Wed Nov 29 05:32:47 2017
I will not mince words - the Government officials who drafted this law have never done a single business. Business includes failure - just see, the most important report is 'Profit and Loss' account, not Profit account. India as a country and particularly the executive has to understand that failure is part of business, and a businessman who fails is not a criminal by default. Best example is the FM who failed to get elected, but is the FM today.This needs to be understood by the judiciary as well. The legislature understands failure well, but they are being steamrolled right now. We have to correct this, and immediately.

Insolvancy Ordinance
R G Paranjpe | Wed Nov 29 05:17:15 2017
I think the spirit & intentions of Govt is correct. The very fact that "promoters who have failed for reasons beyond their control" is in itself shows the poor vision possessed by them. As sustenance business constantly requires the change which in most of the cases found missing. Providing them another innings might prove to be further disastrous to our economy and nation.

Insolvency Ordinance
koushik mukherjee | Wed Nov 29 03:46:56 2017
there is little doubt that the new insolvency code is the biggest reform but it is equally important for the bank to be judgemental towards genuine promoters who have failed for reasons beyond their control.Lets hope that the haste does not lead to injury by the government and the new code guides the ban to a faster resolution.

Don't wait for perfection
Shashank | Wed Nov 29 03:45:31 2017
New code should be welcomed and implemented soon. We can not wait for a perfect law. It can be fine tuned in due course. General public always becomes casualty. Depositors are stake holders whose interest must be considered and bank officials should be held accountable.

Genuine promotor
Robin Gangopadhya | Wed Nov 29 03:43:30 2017
So one has to create some counter balancing forces in this situation whereby one can clearly distinguish a bad from the good. I think this is possible. And this author is going propose in this space. Very soon.

Insolvency ordinance
Goldin Rajeshwar Bennet | Wed Nov 29 03:33:24 2017
When 'genuine' promoters and their guarantors are given a loop-hole, they become willful defaulters and undischarged insolvents. Better they look for capital elsewhere, other than banks, if they are going into high-risk ventures.

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