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The Insolvency and Bankruptcy Code, 2016 is listed for passage in Rajya Sabha today. Last week, Lok Sabha passed the Code with changes recommended by the Joint Parliamentary Committee that examined the Code.[1],[2] We present answers to some of the frequently asked questions in relation to the Insolvency and Bankruptcy Code, 2016. Why do we need a new law?
As of 2015, insolvency resolution in India took 4.3 years on an average. This is higher when compared to other countries such as United Kingdom (1 year) and United States of America (1.5 years). Figure 1 provides a comparison of the time to resolve insolvency for various countries. These delays are caused due to time taken to resolve cases in courts, and confusion due to a lack of clarity about the current bankruptcy framework. What does the current Code aim to do? The 2016 Code applies to companies and individuals. It provides for a time-bound process to resolve insolvency. When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency within a 180-day period. To ensure an uninterrupted resolution process, the Code also provides immunity to debtors from resolution claims of creditors during this period. The Code also consolidates provisions of the current legislative framework to form a common forum for debtors and creditors of all classes to resolve insolvency. Who facilitates the insolvency resolution under the Code? The Code creates various institutions to facilitate resolution of insolvency. These are as follows:
What is the procedure to resolve insolvency in the Code? The Code proposes the following steps to resolve insolvency:
What are some issues in the Code that require consideration?
A version of this blog appeared in the Business Standard on May 7, 2016.
The Union government’s Cabinet Committee on Security recently gave clearance to the Home Ministry’s NATGRID project. The project aims to allow investigation and law enforcement agencies to access real-time information from data stored with agencies such as the Income Tax Department, banks, insurance companies, Indian Railways, credit card transactions, and more. NATGRID, like a number of other government initiatives (UIDAI), is being established through governmental notifications rather than legislation passed in Parliament. The examination of this issue requires an assessment of the benefits of legislation vis-a-vis government notifications. Government notifications can be issued either under a specific law, or independent of a parent law, provided that the department issuing such notification has the power to do so. Rules, regulations which are notified have the advantage of flexibility since they can be changed without seeking Parliamentary approval. This advantage of initiating projects or establishing institutions through government notifications is also potentially of detriment to the system of checks and balances that a democracy rests on. For, while legislation takes a longer time to be enacted (it is discussed, modified and debated in Parliament before being put to vote), this also enables elected representatives to oversee various dimensions of such projects. In the case of NATGRID, the process would provide Parliamentarians the opportunity to debate the conditions under which private individual information can be accessed, what information may be accessed, and for what purpose. This time consuming process is in fact of valuable import to projects such as NATGRID which have a potential impact on fundamental rights. Finally, because changing a law is itself a rigorous process, the conditions imposed on the access to personal information attain a degree of finality and cannot be ignored or deviated from. Government rules and regulations on the other hand, can be changed by the concerned department as and when it deems necessary. Though even governmental action can be challenged if it infringes fundamental rights, well-defined limits within laws passed by Parliament can help provide a comprehensive set of rules which would prevent their infringement in the first place. The Parliamentary deliberative process in framing a law is thus even more important than the law itself. This is especially so in cases of government initiatives affecting justiciable rights. This deliberative process, or the potential scrutiny of government drafted legislation on the floor of Parliament ensures that limitations on government discretion are clearly laid down, and remedies to unauthorised acts are set in stone. This also ensures that the authority seeking to implement the project is The other issue pertains to the legal validity of the project itself. Presently, certain departmental agencies maintain databases of personal information which helps them provide essential services, or maintain law and order. The authority to maintain such databases flows from the laws which define their functions and obligations. So the power of maintaining legal databases is implicit because of the nature of functions these agencies perform. However, there is no implicit or explicit authorization to the convergence of these independent databases. One may argue that the government is not legally prevented from interlinking databases. However, the absence of a legal challenge to the creation of NATGRID does not take away from the importance of establishing such a body through constitutionally established deliberative processes. Therefore, the question to be asked is not whether NATGRID is legally or constitutionally valid, but whether it is important for Parliament to oversee the establishment of NATGRID. In October 2010, the Ministry of Personnel circulated an “Approach paper for a legislation on privacy”. The paper states: “Data protection can only be ensured under a formal legal system that prescribes the rights of the individuals and the remedies available against the organization that breaches these rights. It is imperative, if the aim is to create a regime where data is protected in this country, that a clear legislation is drafted that spells out the nature of the rights available to individuals and the consequences that an organization will suffer if it breaches these rights.” As the lines above exemplify, it is important for a robust democracy to codify rights and remedies when such rights may be potentially affected. The European Union and the USA, along with a host of other countries have comprehensive privacy laws, which also lay down conditions for access to databases, and the limitations of such use. The UIDAI was established as an executive authority, and still functions without statutory mandate. However, a Bill seeking to establish the body statutorily has been introduced, and its contents are being debated in the Parliamentary Standing Committee on Finance and the Bill has also been deliberated on by civil society at large. A similar approach is imperative in the case of NATGRID to uphold the sovereign electorate’s right to oversee institutions that may affect it in the future.
