THE ARRANGEMENT OF THE INSOLVENCY LAW IN THE SHIFTING ECONOMIC PHASES OF INDIA: FROM 1951 TO 2015
Keywords:
Isnolvency, economy, indiaAbstract
In this paper the author has attempted to analyze the corporate insolvency resolution procedures of India within a common framework of well-specified principles. India at present lacks a single, comprehensive law that addresses all aspects of insolvency of an enterprise. The presence of multiple laws and adjudication fora has created opportunities for debtor firms to exploit the arbitrage between the systems to frustrate recovery efforts of creditors. This also adversely impacts timeliness of the resolution process. While the importance of a well-functioning insolvency resolution framework can hardly be overstated, there is no single framework with well-defined rules laid out for organizing an efficient insolvency resolution process. Hence we undertake a cross-country comparison, the underlying motivation being to highlight the similarities as well as differences across the laws and procedures of the three countries. The objective is to learn important lessons for India, in context of the formation of the Bankruptcy Law Reforms Committee (BLRC) in 2014. The Committee has recently recommended an Insolvency and Bankruptcy Code that would be applicable to all non-financial corporations in India. India has faced different economic phases in India such as firstly before Independence, secondly the economic phase between 1951 to 1968, then came the phase when India adopted the Japanese model with immense revolution in the Indian Banking sector to not just consolidate the banking regime on one hand and to prevent the Banks to fall prey of insolvency on the other, phase three was when Non Performing Assets were on rise in India, phase four when India experienced the outreach of microfinance and a special reference is rural sector insolvency and thereafter comes the phase when consumer insolvency is ascending. Thus with each of this phase came its own set of challenges and which in turn affected the way judiciary responded to the cases that came before the court.
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