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Bankruptcy rules for individuals may be delayed due to workload of DRTs

The government planned to notify the bankruptcy provisions last year itself

Veena Mani  |  New Delhi 

14% rise in corporate debt under stress
Bankruptcy rules for individuals may be delayed

provisions for individuals and proprietorship firms, among others, under the and Code (IBC), are unlikely to be put into effect anytime soon due to a heavy workload on (DRTs). Also, the notification of the rules on cross-border could be delayed further in the absence of e-courts, according to official sources.

The government planned to notify the provisions last year itself.

Among the issues being examined by a high-power committee on the is whether or not to notify the and cross-border regulations.

A senior official of the Ministry of Corporate Affairs told Business Standard the crucial issue was how DRTs would manage the load of petitions in addition to the cases already pending with it. “There are around 100,000 cases in various DRTs. We need to strengthen the tribunals before putting more load on them. The existing cases have to be disposed of timely,” the official said.

There was a need to strengthen DRTs before the proposed provisions could be notified, he added.

While cases pertain to companies and are dealt with by the National Company Law Tribnual (NCLT), cases involve individuals, proprietorship firms and corporate guarantors and will be handled by DRTs.

A draft of the rules has already been submitted to a working group dealing with the subject. The working group had recommended that the minimum threshold for cases to come under should be Rs 100,000.

Currently, provisions come under the Presidency Towns Act, 1909, and the Provincial Act, 1920. These Acts will be repealed once new provisions are notified.

Another official said the committee was also evaluating whether the country needed the cross-border provisions. “We need to set up e-courts. The challenge for us would be to determine which of the NCLT benches should have e-courts. Only if India will benefit significantly, this part of the code will be notified,” the official said.

A cross-border framework is a reciprocal arrangement between two governments having similar codes. It provides a mechanism to liquidate or recover from foreign assets of Indian companies undergoing or vice versa.

If the cross-border provisions come into effect, these will be on the lines of the United Nations Commission of International Law model. Several of the big 12 companies undergoing resolution have foreign assets and creditors.

First Published: Tue, February 20 2018. 05:59 IST