LOK SABHA REPORT OF THE JOINT COMMITTEE ON THE INSOLVENCY AND BANKRUPTCY CODE, 2015 SIXTEENTH LOK SABHA Lok Sabha Secretariat New Delhi April, 2016/Vaisakha 1938(Saka) LOK SABHA REPORT OF THE JOINT COMMITTEE ON THE INSOLVENCY AND BANKRUPTCY CODE, 2015 SIXTEENTH LOK SABHA Presented to Lok Sabha on 28 April, 2016 Laid in Rajya Sabha on 28 April, 2016 Lok Sabha Secretariat New Delhi April, 2016/Vaisakha 1938(Saka) 2 CONTENTS Page No. 1. COMPOSITION OF THE JOINT COMMITTEE - (iv) 2. REPORT OF THE JOINT COMMITTEE - 6 - 81 3. BILL AS REPORTED BY THE JOINT COMMITTEE- 82 - 248 APPENDICES Appendix I : Motion in Lok Sabha for reference of the Bill to the Joint Committee Appendix II : Motion in Rajya Sabha Appendix III : Motion regarding extension of time. Appendix IV : List of stakeholders/public at large from whom memoranda were received by the Joint Committee in response to the Press communiqué issued on 26.01.2016 Appendix V : List of Experts/ Statutory/ Regulatory/ Government Bodies/ Trade Unions as well as organizations representing Industry and Professional Bodies who submitted memoranda and tendered evidence before the Joint Committee Appendix VI : Minutes of the sittings of the Joint Committee 3 (iv) COMPOSITION OF THE JOINT COMMITTEE ON THE INSOLVENCY AND BANKRUPTCY CODE, 2015 Shri Bhupender Yadav - Chairperson LOK SABHA 2. Shri P. P Chaudhary 3. Shri Gopal Chinayya Shetty 4. Shri Subhash Baheria 5. Shri Nishikant Dubey 6. Shri Shivkumar C. Udasi 7. Shri Anil Shirole 8. Shri Abhishek Singh 9. Shri Gajendra Singh Shekhawat 10. Dr. Sanjay Jaiswal 11. Shri Jagdambika Pal 12. Shri Jayadev Galla 13. Shri Chandrakant Khaire 14. Shri Chirag Paswan 15. Shri K. C. Venugopal 16. Ms. Sushmita Dev 17. Dr. P. Venugopal 18. Shri Kalyan Banerjee 19. Shri Bhartruhari Mahtab 20. Shri B. Vinod Kumar 21. Shri Jitendra Chaudhury RAJYA SABHA 22. Shri Ajay Sancheti 23. Shri Naresh Gujral # 24. Shri Bhubneswar Kalita @ 25. Shri Praful Patel 26. Shri Ravi Prakash Verma 27. Shri K.C. Tyagi 28. Shri Sukhendu Sekhar Roy 29. Shri Satish Chandra Misra 30. Shri Anand Sharma * ------------------------------------------------------------------------------------------------------------------------------- # Vice Shri Naresh Gujral , MP (Rajya Sabha) retired from Rajya Sabha w.e.f. 9th April, 2016 and re- nominated from Rajya Sabha (Bulletin Part I, No. 5251) w.e.f. 25th April, 2016 *Vice Shri Anand Sharma, MP (Rajya Sabha) resigned his seat from Rajya Sabha w.e.f. 7th March, 2016 (RS Bulletin Part –II dated 7th March, 2016) and re-nominated from Rajya Sabha (Bulletin Part I, No. 5251) w.e.f. 25th April, 2016 @ Vice Shri Bhubaneswar Kaliata, MP (Rajya Sabha) nominated from Rajya Sabha (Bulletin Part I, No. 5251) w.e.f. 25th April, 2016 4 Secretariat 1. Smt. Sudesh Luthra - Joint Secretary 2. Shri J. V. G. Reddy - Director 3. Smt. Jagriti Tewatia - Deputy Secretary 4. Smt. Neena Juneja - Under Secretary REPRESENTATIVES OF MINISTRY OF FINANCE (DEPARTMENT OF ECONOMIC AFFAIRS) 1. Shri Shaktikanta Das - Secretary 2. Shri Ajay Tyagi - Additional Secretary REPRESENTATIVES OF MINISTRY OF LAW & JUSTICE (LEGISLATIVE DEPARTMENT) 1. #Dr. G Narayanan Raju - Secretary 2. Dr. M.Vijayawargiya - Additional Secretary 3. Smt. Veena Kothavale - Additional Legislative Counsel (DEPARTMENT OF LEGAL AFFAIRS) 1. *Shri P K Malhotra - Secretary 2. Shri Suresh Chandra - Additional Secretary 3. Shri Mahendra Khandelwal - Additional Legal Advisor ---------------------------------------------------------------------------------------------------------------- *Since demitted office on 20 April, 2016. #holding dual charge of Legislative Department and Department of Legal Affairs w.e.f. 21 April, 2016 5 REPORT OF THE JOINT COMMITTEE ON THE INSOLVENCY AND BANKRUPTCY CODE, 2015 I, the Chairperson of the Joint Committee to which the Bill* titled `Insolvency and Bankruptcy Code, 2015‘ was referred, having been authorised to submit the Report on their behalf, present this Report with the Bill as amended by the Committee annexed thereto. 2. The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha on 21 December, 2015. The motion for reference of the Bill to a Joint Committee of both the Houses of Parliament was moved in Lok Sabha on 23 December, 2015 by Shri Arun Jaitley, Minister of Finance (Appendix-I). The Rajya Sabha concurred in the said motion on the same date (Appendix-II). The time given to the Committee for making the report as per the aforesaid motion was the last day of the first week of the Budget Session, 2016. One extension for making the report by the last day of the first week of the second part of the Budget Session, 2016 was granted by the House as per the motion moved and adopted on 26 February, 2016(Appendix-III). With the prorogation of Lok Sabha on 29 March, 2016, the second part of the Budget Session, 2016 stood cancelled. Subsequently, summons were issued for the next session i.e. Eighth Session from 25 April, 2016 to 13 May, 2016. The date of commencement of Eighth Session being same as commencement of second part of Budget Session, 2016, the earlier extension given by the House was treated as extension upto the last day of the first week of the Eight Session as per the motion moved and adopted by the Lok Sabha on 25 April, 2016. 3. The objective of the Insolvency and Bankruptcy Code, 2015 is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner. There is no single law in India that deals with insolvency and bankruptcy. As per the present legal framework, provisions relating to insolvency and bankruptcy for companies can be found in the Sick Industrial Companies (Special Provisions) Act, 1985, the Recovery of Debt Due to Banks and Financial Institutions Act, 1993, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Companies Act, 2013. Liquidation of companies is handled by the High Courts. Individual Bankruptcy and Insolvency is dealt with by the Courts. * Published in the Gazette of India, Extraordinary Part-II, Section 2 dated 17.12.2015 6 The existing framework for insolvency and bankruptcy is inadequate, ineffective and results in undue delays in resolution. It has been mentioned in Statement of Objects and Reasons that the Code seeks to provide an effective legal framework for timely resolution of insolvency and bankruptcy which would support development of credit markets and encourage entrepreneurship. It would also improve Ease of Doing Business, and facilitate more investments leading to higher economic growth and development. 4. The Committee held 12 sittings in all. 5. At their first sitting held on 19 January, 2016, the Committee held general discussion on the provisions of the Code and deliberated on the methodology for completion of the task assigned and decided that memoranda from important experts, trade unions, regulatory bodies, professional bodies and concerned Ministries on the aforesaid Bill may be obtained and their views heard by the Committee for a comprehensive and in-depth examination of the legislation. 6. Keeping in view the wide ranging importance of the provisions of the Code, the Committee at their first sitting also decided to invite the views/suggestions from stakeholder and public at large. A press communiqué inviting memoranda was issued accordingly by giving advertisement through DAVP, in response to which 26 memoranda were received out of which 19 memoranda related to the Code were circulated to the members of the Committee (Appendix-IV). The Committee also held a briefing by the representatives of the Department of Economic Affairs. 7. At their second sitting held on 20 January, 2016, the Committee heard the views of Shri T.K.Viswanathan, former Law Secretary, former Secretary General, Lok Sabha and Chairman, Bankruptcy Law Reforms Committee which was constituted by the Department of Economic Affairs to study the corporate bankruptcy legal framework in India and to submit a report. The Committee had also a briefing meeting with Departments of Financial Services, Economic Affairs and the Legislative Department. 8. The Committee at their third, fourth and fifth sittings held on 8, 9 and 16 February, 2016 heard the views/suggestions of 26 experts/representatives of Statutory/Regulatory/Government Bodies and Research Bodies/Trade Unions as well as organisations representing Industry and Professional Bodies (Appendix-V). The 7 Committee also heard the views of Ministry of Labour & Employment and Department of Public Enterprises. 9. The Committee at their sixth sitting held on 16 February, 2016 took evidence of the nodal Department i.e. Department of Economic Affairs as well as Legislative Department, Department of Financial Services and Ministry of Corporate Affairs. 10. Seventh, eighth, ninth and tenth sittings of the Committee were held on 3 and 17 March, 2016, 6 and 7 April, 2016 to take up clause-by-clause consideration of the Code. 11. At their eleventh sitting held on 21 April, 2016, the Committee considered formulations and modifications submitted by the Legislative Department as per decision taken by the Committee during the clause by clause consideration of the Code. 12. At their twelfth sitting held on 26 April, 2016, the Committee considered and adopted the draft report and authorized the Chairman to present the report on their behalf. The Committee also decided that (i) the evidence tendered before the Committee might be laid on the Table of both the Houses of Parliament; (ii) two copies each of the memoranda received by the Committee from various quarters might be placed in the Parliament Library after the Report has been presented to Parliament, for reference by the Members of Parliament. 13. The observations/recommendations of the Committee with regard to principal changes made in the Bill, as decided by the Committee are detailed in the succeeding paragraphs:- 14. Including public financial institutions in the definition of financial institutions – Clause 3(14) The Committee note that Clause 3 defines relevant expressions used in the Bill.