Narendra Modi soon after assume the office of Prime Minister of India started to initiate structured reforms and path breaking steps to take India to new heights than playing mere vote bank politics or giving popular schemes and freebies or lip service to poor people like how the party of the dynast used to do.
The important step taken by the PM Modi in this regard is the enactment of Insolvency and Bankruptcy Code, 2016. The first time voters and youths of India must understand the importance and significance of the new initiative by PM Modi because this reform is meant to save the future of millions of youths in India who wants to become entrepreneurs and look for seed money from various financial institutions.
In the last several decades of congress rule, most of the bad loans what our country suffers today were given mostly under political influence and directives where the default was certain and no legal action was taken and even if any such initiatives were made were just symbolic in nature.
But Narendra Modi led BJP govt. has decided to end this theatrics between wilful defaulters and their political masters in power under congress government and brought the above enactment. The new enactment ensures the credibility of the financial institutions, availability of financial support to the needy and those who intentionally does not want to be defaulters. Earlier, the legal procedure was lengthy, cumbersome, costly, time consuming and in most cases the logical end point would be elusive and far to achieve.
The political interference under UPA rule has reduced the banking system so badly and many loans worth several crore were augured mostly to loot through wilful default and that is how Vijay Mallya got favour from the then UPA government and fled India. However Modi govt. is chasing him to extradite him to India and recover the entire dues. Due to the legal hassle, many such loans the bank would write off as NPA (Non- Performing Asset) in the balance sheet and then would close the chapter. The code enacted by the PM Modi makes the system simple, transparent, time bound, clear and achievable.
The code ensures a uniform, comprehensive insolvency legislation which encompasses companies, partnership firms and individuals excluding financial firms. The present code makes a clear, coherent and rapid process for the speedy identification of the financial distress and immediate resolution of the institutions.
The code clearly suggests two options such as either restructure if viable or go for liquidation if it is not financially viable. The above process is done very fast so that the business doesn’t suffer due to the above legal process. The code replaces the existing laws that cover companies, limited liability partnerships, partnership firms and other corporate persons and individuals. All the existing practices such as Sick Industrial Companies Act, Recovery of Debt Due to Banks and Financial Institutions Act, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI), DRT’s, Lok Adalats and all dealing with bankruptcy procedures will be substituted/guided by the present Insolvency and Bankruptcy Code to improve the performance and enforcement of the existing laws. The important landmark of the code is the timeframe specified for different steps. The timeframe specified in the code is 180 days with 90 day extension for resolving insolvency.
The code clearly prescribes four pillars of institutional infrastructure for administering the bankruptcy procedure such as:
- Insolvency and Bankruptcy Board of India: the regulator that will oversee the new entities.
- Insolvency Professionals: will conduct the insolvency resolution process, take over the management of a company, assist creditors in the collection of relevant information, and manage the liquidation process,
- Insolvency Professional Agencies: will examine and certify the insolvency professionals, and
- Information Utilities: collect, collate and disseminate financial information related to debtors.
As per the new law implemented by the PM Modi, when a loan default takes place, the borrower or the lender shall approach NCLT or DRT (Debt Recovery Tribunal) to start the resolution process. If insolvency is filed, the creditors would assess whether the debtor’s financial situation is viable to continue the business and if, then would provide options to rescue the firm. If the above option is remote, then the process of liquidation would start.
The insolvency of the company/LLP will be adjudicated by NCLT and National Company Law Appellate Tribunal and for individuals and partnership firms, DRT and Debt Recovery Appellate Tribunal would be the adjudicating authority. The creditor would appoint interim Insolvency Professional (IP) to take control over the debtor’s assets and its operations, collect the financial details of the debtors and constitute creditors committee. The resolution would decide either restructuring plan of liquidation process. Accordingly the resolution will be sent to tribunal for approval and would be then implemented.
The code also has provisions to solve cross-border insolvency through bilateral discussions and agreements with the respective countries. According to the new code, insolvency process is completed in short time, filing of bankruptcy has to be done in three months and filing claims and appeals also must be done within 180 days.
Further the interest of workers is protected by the code implemented by the PM Modi and the provident fund, pension fund and gratuity fund are excluded from the estate of bankruptcy. Similarly during liquidation, workers’ salaries for the period of 24 months will be paid as first step ahead of securing the loans of the creditors.
The biggest step is that anyone who is declared as insolvent and bankrupt under the code will not be allowed to hold public office or political position. The code is meant to help the creditors to avoid unnecessary and time consuming legal proceedings and also ease doing business in India.
People of India must re-elect Narendra Modi led BJP in 2019 to save India from the rotten, corrupt, dynastic, power hungry looters who wants to gang up and defeat the PM Modi.
Let us SAVE INDIA and RE-ELECT Narendra MODI.