Continuing our regular coverage of India’s parliamentary sessions, Mandira Kala and Gayatri Mann assess key commercial bills that were debated and passed during the recent session
Last year witnessed the introduction and passage of key bills in parliament aimed at strengthening the financial stability of the economy. The Financial Resolution and Deposit Insurance Bill, 2017, was introduced to create a time-bound and orderly mechanism for the resolution of failing financial companies, and the Banking Regulation (Amendment) Act, 2017, was passed in August 2017 to create a procedure for banks to deal with bad loans.
Carrying this momentum forward, the winter session of parliament, which concluded on 5 January, saw legislative developments in the financial sector, including the introduction and discussion of key legislation that affects the economy and ease of doing business in India. The status and main highlights of key bills are discussed below.
The Insolvency and Bankruptcy (Amendment) Bill, 2017
As of 2017, insolvency resolution took 4.3 years on average in India, with delays caused by a combination of time taken to resolve cases in courts, and confusion due to a lack of clarity about the bankruptcy framework. To create a time-bound mechanism for the resolution of insolvency of companies and individuals, the government introduced the Insolvency and
Bankruptcy Code, 2016.
The code is in its early stages of implementation, with the first case resolved in August 2017. In the past two years, 300 cases have been registered under the code, some of which have been challenged in courts. Initial provisions of the code did not restrict any person from submitting a resolution plan or participating in the acquisition process of the assets of a company at the time of liquidation. A committee was set up in November 2017 to review the code and identify issues in its implementation.
Following this, an ordinance was promulgated in November 2017 to prohibit certain persons from submitting resolution plans to resolve defaulting companies. The Insolvency and Bankruptcy (Amendment) Bill, 2017, was introduced to replace the ordinance and prohibit certain people from submitting resolution plans or participating in the liquidation process. This includes promoters and company management if the company’s debt has been a non-performing asset for more than one year.
MANDIRA KALA is head of research and GAYATRI MANN is an associate analyst at PRS Legislative Research, a think-tank that tracks the functioning of the Indian parliament and works with members of parliament from the Lok Sabha and Rajya Sabha, across political parties, and members of the legislative assemblies of various states.