Insolvency And Bankruptcy Code

1100 Words5 Pages

Insolvency & Bankruptcy Code vis-à-vis Foreign Direct Investment
1. Introduction
The paper is a take on the current Insolvency & Bankruptcy Code introduced by India and its consequent effect on foreign direct investment earned by the country. The authors believe that the two concepts are very closely linked.
The average time taken to resolve insolvency in India is higher than most countries in the world. According to World Bank data, the average resolution period in India is 4.3 years, which is very high as compared to 6 months in Japan, 8 months in Canada and Singapore and 1 year in UK and USA. The new code reduces the amount of time taken considerably to 180 with a one-time extension of 90 days.
Currently, India has the lowest debt recovery …show more content…

India prior to this had dated and redundant laws when it came to bankruptcy and insolvency provisions. The regime was not only flawed but was also inadequate and time consuming. The biggest discouraging factor for the investors and/or entrepreneurs was the fact that in order to recover from an ‘investment gone bad’, they would have to deal with a maze of scattered laws for the revival, to exit or for restructuring of the company. Nearly half a dozen laws covered the insolvency and bankruptcy provisions- ranging from the Indian Contract Act to SARFESI. The laws related to recovery of debts to banks, financial institutions, companies and winding up proceedings, sick companies, public and other statutory financial corporations. To further add to this complicated array of laws, was the hierarchy in debt recovery. The government being on top of the list and the unsecured creditors were at the bottom. The complex varying laws, involvement of multiple variables in debt recovery, various attempts by the debtor to stall recovery and creative lawyering resulted in never ending proceedings and ultimately the defeat of the purpose of recovering owed …show more content…

Surely, such a situation was not contemplated by the Parliament while enacting the SARFAESI Act and therefore the interpretation sought to be made by the learned counsel appearing on behalf of the Banks cannot be accepted by this Court as the same is wholly untenable in

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