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LEGAL
FRAMEWORK
FOR
INSOLVENCY
AND
The current framework of Insolvency and Bankruptcy in India is a multilayered structure covered by many laws. Following are the laws presently
in force:
The Presidency Towns Insolvency Act, 1909
Deals with the insolvency of Individuals and Partnerships and Associations
of Individuals in the Presidency towns of Chennai, Kolkata and Mumbai.
The High Courts of these presidencies have the jurisdiction over the
insolvency proceedings.
The Provincial Insolvency Act, 1920
Deals with the insolvency of Individuals and Partnerships and Associations
of Individuals in areas other than the Presidency Towns. The State
Governments have assigned the Subordinate courts to handle the
insolvency proceedings and District courts being the courts of appeal.
The Limited Liability Partnership Act, 2008 (LLPA)
Deals with the whole proceedings of compromise, arrangements,
reconstruction, winding up and dissolution of Limited Liability
Partnerships. A few minor changes have been brought through in this Act
in the Limited Liability Partnership Rules, 2012, which excludes the
rehabilitation or revival of a sick LLP.
The Sick Industrial Companies (Special Provision) Act, 1985 (SICA)
Deals with the rehabilitation of sick/potentially sick industrial companies.
It is presently the only central corporate rescue law. There has been a
repealing legislation, the Sick Industrial Companies Repeal Act, 2003
which hasnt been notified yet.
The Companies Act, 1956 (CA 1956)
Deals with the corporate revival and rehabilitation of companies other
than the industrial companies. It also deals with the winding up
are
voluntarily
and
201
4
Outcome
Amendments
to
the
Provincial
Insolvency Act,
1920
Tiwari Committee (Dept. SICA, 1985
of Company Affairs)
Narasimham Committee I RDDBFI Act, 1993
(RBI)
Narasimham Committee SARFAESI Act, 2002
II (RBI)
Justice Eradi Committee Companies (Amendment) Act, 2002,
(GOI)
Proposed
repeal of SICA
L N Mitra Committee Proposed a comprehensive bankruptcy
(RBI)
code
Irani Committee (RBI)
Enforcement of Securities Interest and
Recovery of Debts Bill, 2011. (With
amendments to RDDBFI and SARFAESI)
Raghuram
Rajan Proposed improvements to credit
Committee
(Planning infrastructure
Commission)
Financial
Sector Draft Indian Financial Code which
Legislative
Reforms includes a
Committee (Ministry of Resolution Corporation for resolving
Finance)
distressed financial firms
Bankruptcy Law Reform Draft Insolvency and Bankruptcy Bill,
Committee
2015
The bill tries to remove all difficulties in the present arrangement and
provide a sound framework for insolvency resolution. The bill adheres to
all the objectives needed to establish an effective insolvency law as laid
down in the UNCITRAL, Legislative Guide on Insolvency Law5.
IMPLEMENTATION OF INSOLVENCY AND BANKRUPTCY BILL, 2015
In order to ensure smooth enforcement of Insolvency and Bankruptcy Bill,
it is essential to do away with conflicting or parallel provisions in other
laws. As mentioned before, presently there are several laws covering
insolvency of companies, limited liability partnerships, partnerships and of
individuals. In order to avoid ambiguity, there is a need to bring
amendments to some existing laws. It is also essential to repeal some
obsolete laws which are no longer required once the new bill comes into
picture. Below mentioned are the Acts which need to be amended 6 or
repealed7:
REFERENCES
Sub-section (1) of Section 188 of the draft of the Insolvency and Bankruptcy Bill,
2015
5
Section 235 of the draft of the Insolvency and Bankruptcy Bill, 2015
Section 234 of the draft of the Insolvency and Bankruptcy Bill, 2015