Bankruptcy Code sent to the joint parliamentary panel

It was thought the Bankruptcy and Insolvency Code was introduced in the Lok Sabha on Monday because the ruling coalition is short of a majority in the Rajya Sabha. However, it turns out that the Bill is probably not a money Bill, and was referred to a 30-member joint committee of the two Houses of Parliament on Wednesday, the last day of the winter session.

Initially, confusion arose since the government said the ingredients of the Code were that of a money Bill. However, it then agreed both the Houses of Parliament could discuss the Bill to improve it.

"It is not a money Bill," sources in the Lok Sabha secretariat said.

According to political sources, the Code would have otherwise been referred to the standing committee on finance. Since the standing committee is headed by Congress leader Veerappa Moily, the ruling coalition was comfortable referring it to a joint committee.

Experts, however, say merely referring a Bill to a joint committee does not mean the legislation ceases to be a money Bill. "Even a money Bill could be referred to a joint committee," Constitution expert Subhash Kashyap said.

In case of a money Bill, it has to be first introduced in the Lok Sabha. The Rajya Sabha gets 14 days to respond to it. Amendments suggested by the upper House can all be rejected by the lower House.

Article 110 of the Constitution says a money Bill must have provisions relating to imposition, abolition of tax, appropriation of money out of the Consolidated Fund and other related matters.

It is the the Lok Sabha Speaker who decides whether a Bill is a money Bill or not.

The bankruptcy Bill provides for resolution of insolvency in a time-bound manner.

In the order of priority, the first charge will be insolvency resolution process cost to be followed by secured creditors and workers' dues for 12 months, unpaid dues to employees other than workmen, unsecured creditors, government taxes for two years, other debts, preference share holders and equity shareholders.

The provision will help the workers get some money in case of closure of a company and the sacrifice will be made by the government, finance minister Arun Jaitley said. Under the existing system, nothing is left after the payment of tax dues, he added.

THE LOWDOWN

• It was thought the Bankruptcy and Insolvency Code was introduced in the Lok Sabha on Monday because the ruling coalition is short of a majority in the Rajya Sabha
• However, it turns out that the Bill is probably not a money Bill, and was referred to a 30-member joint committee of the two Houses of Parliament on Wednesday, the last day of the winter session
• Initially, confusion arose since the government said the ingredients of the Code were that of a money Bill
• However, it then agreed both the Houses of  Parliament could discuss the Bill to improve it

Jaitley also said the proposed law would help in utilisation of the assets of insolvent companies.

The Bill provides for setting up of a 'Insolvency and Bankruptcy Board of India' to regulate professionals, agencies and information utilities engaged in resolution of insolvency of companies, partnership firms and individuals.

"The Code also proposes to establish a fund to called the Insolvency and Bankruptcy Fund of India...," said the statement of objects and reasons of the Bill.

According to the proposed legislation, the corporate insolvency would have to be resolved within a period 180 days, and extendable by a further 90 days. It also provides for fast-track resolution of corporate insolvency within 90 days.

Currently, there is no single law dealing with insolvency and bankruptcy. Liquidation of companies is handled by the high courts, individual cases are dealt with under the Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920.

The other laws dealing with issue include SICA, 1985; Recovery of Debt Due to Banks and Financial Institution Acts, 1993, Sarfaesi Act, 2002 and Companies Act, 2013.