Budget 2015-16 : Bankruptcy law
1)
Facts
:
i.
as per the recent Doing Business, 2015 Report, India is ranked 134
on the ease of doing business and at 137 for resolving insolvencies.
ii.
The average time taken for insolvency proceedings in India is
about 4.3 years, while it is only 1.7 years in high-income OECD countries.
iii.
The recovery rate (cents on the dollar) is 71.9 in high-income
OECD countries as opposed to 25.7 in India.
2)
The
budget has identified reform in bankruptcy laws as
a key priority, envisaging legal clarity and speedy processes that will
ultimately ease doing business in India.
3)
A new bankruptcy law coupled with practical changes, removing
the judicial bottlenecks and delays, will be crucial to the reform process.
4)
The connection between better insolvency laws and economic
growth is straightforward: stronger bankruptcy laws :-
i.
protect the rights of borrowers and lenders
ii.
promote predictability and clarify the risks associated
with lending
iii.
make the collection of debt through bankruptcy proceedings more
attractive
5)
The above factors ultimately facilitate credit and thus a higher
flow of capital in the economy.
6)
The Bankruptcy Law Reform
Committee set up by the Ministry of Finance in August 2014 will be crucial to
the new legislation promised in the Budget. The Interim Report of the Committee
was released in February 2015.
7)
The Committee sees the early recognition of financial distress
and timely intervention as key features of efficient rescue regimes. An
unviable company should be liquidated as soon as possible to minimise losses
for stakeholders.
8)
They recommend that secured creditors be allowed to file an
application for the rescue of a company at a sufficiently early stage, rather
than wait for the company to have defaulted on 50 per cent of its outstanding debt,
as currently provided for in the Companies Act, 2013.
9)
Unsecured creditors representing 25 per cent of the debt be
allowed to initiate rescue proceedings against the debtor company.
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Nepal crisis over framing of Constitution
1)
As the crisis in Nepal over framing a Constitution deepens,
senior Maoist Opposition leader and former Prime Minister Baburam Bhattarai met
President Pranab Mukherjee and External Affairs Minister Sushma Swaraj to discuss
the situation.
2)
Mr. Bhattarai’s meetings in India have sparked speculation that
the opposition is reaching out to the Narendra Modi government to play a role
in mediating the current crisis, with Nepal’s parties unable to break the deadlock.
However, Mr. Bhattarai denied that he was “inviting interference” from India, “but
a positive role as a good neighbour, to promote a conclusion of the peace process.”
3)
The UCPN (Maoist)-led 30-party alliance walked out of talks with
the government led by Prime Minister Sushil Koirala over differences on how to
resolve the remaining issues after the political parties missed their
self-imposed January 22 deadline to complete the Constitution process.
4)
The deadlock over framing of Constitution is over :-
i.
reforming
federal system
ii.
form
of government
iii.
electoral
process
5)
The
Maoist parties of Nepal want to improve on the electoral
system of ‘first past the post’ by introducing proportional representation that
would include Dalits, women and other oppressed identities into the system. Federalism
and inclusive democracy are the two bone of contentions between the left and
other parties.
6)
Maoist parties have been pushing for a consensus to drive the
process as well, while the government that has a majority in Parliament has
been pushing for a vote.
7)
India's position : In his visit to the Himalayan country last
year, Mr. Modi has called for a Constitution through “consensus not by majority
vote".
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