Parliament on Wednesday passed a bill that seeks to create time-bound processes for insolvency resolution of companies and individuals.
Insolvency is a situation where an individual or a company is unable to repay their outstanding debt.
The Insolvency and Bankruptcy Code Bill was approved by the Rajya Sabha by voice vote after a brief debate. The Lok Sabha had passed it on March 5.
Replying to a debate on the bill, Minister of State for Finance Jayant Sinha termed it as a "historic" legislation.
The minister allayed apprehensions about the possibility of declaration of repeated bankruptcy by individuals and companies saying creditors will not park their money again and again with such individuals and entities.
"We are changing the Indian economy. We will do so while protecting the people who matter most...The most vulnerable are protected first. The way this law is being set up, it protects the workers. We wanted to protect the most.
vulnerable. We are trying to create a robust safety note," Sinha said.
With the passage of this law, there would be one law dealing with bankruptcy while doing away with at least 12 different legislations, some of which are centuries old.
The government expects that the new framework is expected help in improving India's position in the World Bank's ease of doing business ranking.
According to the provisions of the bill, these processes will be completed within 180 days. If insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors, according to PRS legislative research.
Congress member T Subbarami Reddy, who had moved more than a dozen amendments did not press for them citing time constraint and the bill passed without any amendment.
The bankruptcy bill was introduced in Lok Sabha on December 21, 2015 and was later referred to the Joint Committee of Parliament.
The Committee submitted its recommendations and a modified Code based on its suggestions on April 28, 2016.
This modified Code was passed by Lok Sabha on May 5, 2016.
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