Bankruptcy Code must cover overseas assets too: House panel

The Joint Parliamentary Committee looking into the proposed bankruptcy and insolvency law has suggested changes to the Insolvency and Bankruptcy Code 2015.

Sources told BusinessLine that the Committee, which met on Tuesday to adopt the report, has suggested including a section on resolution of cross-border insolvency so as to deal with cases such as loan default by former Kingfisher Airlines chief Vijay Mallya or the Tata Steel-Corus case. This will help in situations where a debtor has assets overseas that can be used by domestic creditors.

The panel also stressed that all labour law provisions must be followed during liquidation proceedings and the interest of workmen must be a priority.

The Joint Committee report is likely to be tabled in Parliament in a day or so. The government hopes to get the Bill through Parliament in the ongoing session.

To incorporate the Committee’s suggestions, the Finance Ministry will have to move amendments to the Bill, as in its current form the legislation does not provide for cross-border insolvency. Bankruptcy tribunals are expected to begin functioning within three months of the passage of the law.

The Bill, which seeks to expedite resolution of corporate and individual bankruptcy, was introduced by Finance Minister Arun Jaitley in Parliament in December. Apart from the GST Bill, this is one of the key reforms the NDA government is hoping to take forward.

TK Viswanathan, Head of Bankruptcy Law Reform Committee that drafted the Bill, had said an extra chapter on cross-border insolvency can be added at a later stage through an amendment.

He told BusinessLine that the the Bill’s passage would also give a fillip to bond market as it would put unsecured creditors on a par with secured creditors. “If a secured creditor joins the resolution plan, he will forfeit his right to enforce his security but will get a higher possession when the assets are distributed. The process will be more time bound and the value of the assets will be protected unlike in other cases, whereby the time he enforces and realises his security, there will be nothing left of value,” he said.

(Inputs from Richa Mishra, Surabhi)