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Lok Sabha passes Bankruptcy Bill

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Bill passed: Insolvency and Bankruptcy Code Bill, 2016 – The Parliament,New Delhi.

Motto: The “Transformational” legislation that will help improve India’s ranking in the World Bank’s ‘Ease of Doing Business’ index.

Jayant Sinha, Minister of State for Finance, the Government had “in toto” accepted the report of the Joint Committee of Parliament.

  • Member of Parliament Jayadev Galla concerning that banks have started “tightening on promoters” and were “insisting on personal guarantees”.

Features of the bill:

  • To lead the “friction-free” market processes that will help create jobs.
  • To provide for cross-border insolvency which is not early done in 2015.PARLIAMENT
  • The Bill has also strengthened workmen rights as well as creditor rights.
  • To provide a better deal for workmen in the waterfall.


  • There is no“cherry picking” on the category of persons.
  • Everybody (workmen, secured creditors etc) will get liquidation proceeds on a pari-passu basis.
  • “Transformational” i.e., To facilitates much for broader and deeper debt markets in the country.
  • To reduce the need for “personal guarantees” of promoters while availing bank loans.

Additional Advantages:

  • Proceedings against ‘wilful defaulter’ will be independent of bankruptcy.
  • The process of action against ‘wilful defaulter’ will be “criminal” action.

Other Important notes:

  • A wilful defaulter is one who does not pay back bank loans.
  • To conveying the funds advanced by banks to deploy them for other uses.

About Asset Reconstruction Companies (ARCs):

  • Wherever Insolvency and Bankruptcy Code gets enacted into a law, ARCs will have a role to play.
  • The ARCs will be a valuable element of the new ecosystem being put in place by all.
  • The government had accepted upto 100 per cent foreign direct investment in ARCs.