Bankruptcy Law Reform Committee submits its Report to the Union Finance Minister Shri Arun Jaitley
Bankruptcy Law Reform Committee submits its Report to the
Union Finance Minister Shri Arun Jaitley ; Government invites comments on the
report from the stakeholders by 19th Novemebr,2015
The Finance Minister Shri Arun Jaitley, in his Budget Speech 2015-16, had
identified Bankruptcy Law Reform as a key priority for improving the ease of
doing business and had announced that a comprehensive Bankruptcy Code, meeting
global standards and providing necessary judicial capacity, will be brought in
fiscal 2015-16.
The Government had constituted a Bankruptcy Law Reform Committee under the
Chairmanship of Dr. T. K. Viswanathan, former Law Secretary to look into
various Bankruptcy related issues and give its report along with a draft Bill
on the subject to the Government.
Dr. Viswanathan submitted the Report of the Committee to the Finance
Minister Shri Arun Jaitley in his office here today. The Report is in two
parts: Volume I – titled “Rationale and Design” and Volume II – titled “Draft
Insolvency and Bankruptcy Bill”.The Report, along with a
brief summary of the recommendations, has been placed on the website of the
Ministry of Finance atwww.finmin.nic.in for stakeholder
consultation. Comments/suggestions, if any, on the Report may be sent to the
OSD (FSLRC & Law), Ministry of Finance, Deptt. of Economic Affairs, Room
No. 30, North Block, New Delhi 110001, preferably by email atpraveen.trivedi@nic.in
by 19.11.2015.
After taking the suggestions/views into consideration, the Government will
take a final decision on the Report and introduce the Bill in Parliament as
early as possible.
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PM to launch Gold Related Schemes on 5th November, 2015;
First ever National Gold Coin minted in India with National Emblem of Ashok
Chakra engraved to be released among others on the occasion
The Prime Minister Shri Narendra Modi will launch the three Gold related
Schemes i.e. Gold Monetisation Scheme (GMS), Gold Sovereign Bond Scheme and the
Gold Coin and Bullion Scheme on Thursday, 5th November, 2015 in
the national capital.
The salient features of each of the aforesaid scheme are as follows:
Gold Monetisation Scheme (GMS), 2015
The GMS will replace the existing Gold Deposit Scheme, 1999. However, the
deposits outstanding under the Gold Deposit Scheme will be allowed to run till
maturity unless the depositors prematurely withdraw them.
Resident Indians (Individuals, HUF, Trusts including Mutual
Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and
Companies) can make deposits under the scheme. The minimum deposit at any one
time shall be raw gold (bars, coins, jewellery excluding stones and other metals)
equivalent to 30 grams of gold. There is no maximum limit for deposit under the
scheme.
The gold will be accepted at the Collection and Purity Testing
Centres (CPTC) certified by Bureau of Indian Standards (BIS). The deposit
certificates will be issued by banks in equivalent of 995 fineness of
gold. The designated banks will accept gold deposits under the Short Term (1-3
years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years)
Term Government Deposit Schemes (MLTGD). While the former will be accepted by
banks on their own account, the latter will be on behalf of the Government of
India. There will be provision for premature withdrawal subject to a minimum
lock-in period and penalty to be determined by individual banks for the STBD.
The interest rate in the STBD will be determined by the banks. The
interest rate in the medium term bonds has been fixed at 2.25% and for the long
term bonds is 2.5% for the bonds issued in 2015-16.
Interest on deposits under the scheme will start accruing from the date of
conversion of gold deposited into tradable gold bars after refinement or 30
days after the receipt of gold at the CPTC or the bank’s designated branch, as
the case may be and whichever is earlier. During the period from the date of receipt
of gold by the CPTC or the designated branch, as the case may be, to the date
on which interest starts accruing in the deposit, the gold accepted by the CPTC
or the designated branch of the bank shall be treated as an item in safe
custody held by the designated bank.
The Short Term Bank Deposits will attract applicable Cash Reserve Ratio
(CRR) and Statutory Liquidity Ratio (SLR). However, the stock of gold held by
the banks will count towards the general SLR requirement. The opening of Gold
Deposit Accounts will be subject to the same rules with regard to customer
identification (KYC) as are applicable to any other deposit account.
The designated banks may sell or lend the gold accepted under STBD to MMTC
for minting India Gold Coins (IGC) and to jewellers, or sell it to other
designated banks participating in GMS. The gold deposited under MLTGD will be
auctioned by MMTC or any other agency authorised by the Central Government and
the sale proceeds credited to the Central Government’s account with the Reserve
Bank of India. The entities participating in the auction may include the
Reserve Bank, MMTC, banks and any other entities notified by the Central
Government. Banks may utilise the gold purchased in the auction for purposes
indicated above. Designated banks should put in place a suitable risk
management mechanism, including appropriate limits, to manage the risk arising
from gold price movements in respect of their net exposure to gold. For this
purpose, they have been allowed to access the international exchanges, London
Bullion Market Association or make use of over-the-counter contracts to hedge
exposures to bullion prices subject to the guidelines issued by the Reserve
Bank.
Complaints against designated banks regarding any discrepancy in issuance
of receipts and deposit certificates, redemption of deposits, payment of
interest will be handled first by the bank’s grievance redress process and then
by the Reserve Bank’s Banking Ombudsman.
It may be recalled that the Government of India announced the Gold
Monetisation Scheme vide its Office Memorandum F.No.20/6/2015-FT dated
September 15, 2015. The objective of the Scheme is to mobilise gold held by
households and institutions of the country and facilitate its use for
productive purposes, and in the long run, to reduce country’s reliance on the
import of gold..
The list of CPTCs and Refiners are certified by the Bureau of Indian
Standards. Indian Banks Association has finalized the necessary documentation
including the tripartite agreements between the designated banks, CPTCs and the
Refiners under the Scheme. Banks have put in place the requisite systems and
procedures to implement the scheme and will continue to improve them.
Sovereign Gold Bond Scheme
The Government of India has decided to issue Sovereign Gold Bonds. The
Bonds will be issued in multiple tranches subject to the overall borrowing
limits of GOI. Applications for the bond under the first tranche will be
accepted from November 05, 2015 to November 20, 2015. The Bonds will be issued
on November 26, 2015. The Bonds will be sold through banks and designated post
offices as notified. It may be recalled that the Union Finance Minister had
announced in Union Budget 2015-16 about developing a financial asset, Sovereign
Gold Bond, as an alternative to purchasing metal gold.
Sovereign Gold Bond will be issued by Reserve Bank India on behalf of the
Government of India. The Bonds will be restricted for sale to resident Indian
entities including individuals, HUFs, trusts, Universities, charitable
institutions. The Bonds will be denominated in multiples of gram(s) of gold
with a basic unit of 1 gram. The tenor of the Bond will be for a period of 8
years with exit option from 5th year to be exercised on the interest payment
dates. Minimum permissible investment will be 2 units (i.e. 2 grams of
gold).The maximum amount subscribed by an entity will not be more than 500
grams per person per fiscal year (April-March). A self-declaration to this
effect will be obtained. A mechanism will be put in place for internal
verification of the self declarations.
In case of joint holding, the investment limit of 500 grams will be applied
to the first applicant only. Each tranche will be kept open for a period to be
notified. The issuance date will also be specified in the notification. Price
of Bond will be fixed in Indian Rupees on the basis of the previous week’s
(Monday–Friday) simple average of closing price of gold of 999 purity published
by the India Bullion and Jewellers Association Ltd. (IBJA).Payment for the
Bonds will be through electronic funds transfer/cash payment/ cheque/ demand
draft. The investors will be issued a Stock/Holding Certificate.
The Bonds are eligible for conversion into demat form. The redemption
price will be in Indian Rupees based on previous week’s (Monday-Friday) simple
average of closing price of gold of 999 purity published by IBJA. Bonds will be
sold through banks and designated Post Offices, as notified, either directly or
through agents. The investors will get interest at a fixed rate of 2.75
per cent per annum payable semi-annually on the initial value of investment for
the bonds issued in 2015-16.
Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is
to be set equal to ordinary gold loan mandated by the Reserve Bank from time to
time. Know-your-customer (KYC) norms will be the same as that for purchase of
physical gold. KYC documents such as Voter ID, Aadhaar Card/PAN or TAN
/Passport will be required. The interest on Gold Bonds shall be taxable as per
the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax
shall also remain same as in the case of physical gold. Department of Revenue
has agreed to ensure tax neutrality between the purchase of physical gold and
investment in the gold bonds. This will require amendments in the existing provisions
of the Income Tax act , which will be considered in the 2016-17 Budget. Bonds
will be tradable on exchanges/NDS-OM from a date to be notified by RBI..The
Bonds will be eligible for Statutory Liquidity Ratio (SLR). Commission for
distribution shall be paid at the rate of 1% of the subscription amount.
Gold Coin/Bullion Scheme
The Indian gold coin & bullion is a part of the Gold Monetisation
Programme. The coin will be the first ever national gold coin minted in
India and will have the National Emblem of Ashok Chakra engraved on one
side and Mahatma Gandhi on the other side . Initially the coins will be
available in denominations of 5 and 10 grams. A 20 gram bullion will also be
available. Initially, 15,000 coins of 5gm, 20,000 coins of 10 gm and 3,750 of
bullions of 20 gm will be made available through MMTC outlets. The
Indian Gold coin & bullion is unique in many aspects and will carry
advanced anti-counterfeit features and tamper proof packaging.
The Indian Cold coin & bullion will be of 24 karat purity and 999
fineness. All coins & bullion will be hallmarked as per the BIS standards.
These coins will be distributed initially through designated & recognised
MMTC outlets and later through specified bank branches and post offices.
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Joint Press Statement issued after the second meeting of
U.S-India investment initiative
Shri Ajay Tyagi, Additional Secretary, Department of Economic Affairs,
Ministry of Finance and Mr Ramin Toloui, Assistant Secretary for International
Finance, U.S. Department of Treasury participated in the second Meeting of the
U.S-India Investment Initiative, held here today.
Following is the Text of the Joint Press Statement issued after the second U.S-India Investment Initiative Meet today: “The U.S.-India Investment Initiative will help our governments discuss and explore capital market reforms and policy measures to spur long-term investment by domestic and foreign investors in India.”
“Our discussion today focused on potential policy measures that could deepen India’s capital markets and drive greater U.S. investment in India. Specifically, we discussed new initiatives to mobilize private capital to fund infrastructure, policies that can develop a deeper and more liquid corporate debt market, and instruments to help sub-sovereign governments raise financing for development. We also discussed potential avenues of technical collaboration between the Ministry of Finance and Treasury in developing deeper and more robust Indian capital markets. We look forward to continued engagement between India and the United States on economic issues at the sixth annual U.S.-India Economic and Financial Partnership Dialogue in Washington, D.C. in 2016.”
Following is the Text of the Joint Press Statement issued after the second U.S-India Investment Initiative Meet today: “The U.S.-India Investment Initiative will help our governments discuss and explore capital market reforms and policy measures to spur long-term investment by domestic and foreign investors in India.”
“Our discussion today focused on potential policy measures that could deepen India’s capital markets and drive greater U.S. investment in India. Specifically, we discussed new initiatives to mobilize private capital to fund infrastructure, policies that can develop a deeper and more liquid corporate debt market, and instruments to help sub-sovereign governments raise financing for development. We also discussed potential avenues of technical collaboration between the Ministry of Finance and Treasury in developing deeper and more robust Indian capital markets. We look forward to continued engagement between India and the United States on economic issues at the sixth annual U.S.-India Economic and Financial Partnership Dialogue in Washington, D.C. in 2016.”
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Summary of the Recommendations of the Bankruptcy Law
Reforms Committee (BLRC)
Following is the Summary of the Recommendations of the
Bankruptcy Law Reforms Committee (BLRC)
The Report of the BLRC is in two parts:
i. Rationale
and Design/Recommendations;
ii. A
comprehensive draft Insolvency and Bankruptcy Bill covering all entities.
The draft Bill has consolidated the existing laws relating to
insolvency of companies, limited liability entities (including limited
liability partnerships and other entities with limited liability), unlimited
liability partnerships and individuals which are presently scattered in a
number of legislations, into a single legislation. The committee has observed
that the enactment of the proposed Bill will provide greater clarity in the law
and facilitate the application of consistent and coherent provisions to
different stakeholders affected by business failure or inability to pay debt
and will address the challenges being faced at present for swift and effective
bankruptcy resolution. The Bill seeks to improve the handling of conflicts
between creditors and debtors, avoid destruction of value, distinguish
malfeasance vis-a-vis business failure and clearly allocate losses in
macroeconomic downturns.
The major recommendations of the Report are as
follows:
i. Insolvency
Regulator: The Bill proposes to establish an Insolvency Regulator to
exercise regulatory oversight over insolvency professionals, insolvency
professional agencies and informational utilities.
ii. Insolvency
Adjudicating Authority: The Adjudicating Authority will have the
jurisdiction to hear and dispose of cases by or against the debtor.
a. The Debt Recovery Tribunal
(“DRT”) shall be the Adjudicating Authority with jurisdiction over individuals
and unlimited liability partnership firms. Appeals from the order of DRT shall
lie to the Debt Recovery Appellate Tribunal (“DRAT”).
b. The National Company Law Tribunal (“NCLT”) shall be the
Adjudicating Authority with jurisdiction over companies, limited liability
entities. Appeals from the order of NCLT shall lie to the National Company Law
Appellate Tribunal (“NCLAT”).
c. NCLAT shall be the appellate authority to hear appeals
arising out of the orders passed by the
Regulator in respect of insolvency professionals or information utilities.
iii. Insolvency
Professionals: The draft Bill proposes to regulate insolvency
professionals and insolvency professional agencies. Under Regulator’s
oversight, these agencies will develop professional standards, codes of ethics
and exercise a disciplinary role over errant members leading to the development
of a competitive industry for insolvency professionals.
iv. Insolvency
Information Utilities: The draft Bill proposes for information
utilities which would collect, collate, authenticate and disseminate financial
information from listed companies and financial and operational creditors of
companies. An individual insolvency database is also proposed to be set up with
the goal of providing information on insolvency status of individuals.
v. Bankruptcy
and Insolvency Processes for Companies and Limited Liability Entities: The
draft Bill proposes to revamp the revival/re-organisation regime applicable to
financially distressed companies and limited liability entities; and the
insolvency related liquidation regime applicable to companies and limited
liability entities.
a. The draft Bill lays down a clear, coherent and speedy process for early
identification of financial distress and revival of the companies and limited
liability entities if the underlying business is found to be viable.
b. The draft Bill prescribes a swift process and timeline of 180 days
for dealing with applications for insolvency resolution. This can be extended
for 90 days by the Adjudicating Authority only in exceptional cases. During
insolvency resolution period (of 180/270 days), the management of the debtor is
placed in the hands of an interim resolution professional/resolution professional.
c. An insolvency resolution plan prepared by the resolution
professional has to be approved by a majority of 75% of voting share of the
financial creditors. Once the plan is approved, it would require sanction of
the Adjudicating Authority. If an insolvency resolution plan is rejected, the
Adjudicating Authority will make an order for the liquidation.
d. The draft Bill also provides for a fast track insolvency
resolution process which may be applicable to certain categories of
entities. In such a case, the insolvency resolution process has to be completed
within a period of 90 days from the trigger date. However, on request from the
resolution professional based on the resolution passed by the committee of
creditors, a one-time extension of 45 days can be granted by the Adjudicating
Authority. The order of priorities [waterfall] in which the
proceeds from the realisation of the assets of the entity are to be distributed
to its creditors is also provided for.
vi.
Bankruptcy
and Insolvency Processes for Individuals and Unlimited Liability Partnerships: The
draft Bill also proposes an insolvency regime for individuals and unlimited
liability partnerships also. As a precursor to a bankruptcy process, the draft
Bill envisages two distinct processes under this Part, namely, Fresh Start and
Insolvency Resolution.
a.
In
the Fresh Start process, indigent individuals with income and assets lesser than
specified thresholds (annual gross income does not exceed Rs. 60,000 and
aggregate value of assets does not exceed Rs.20,000) shall be eligible to apply
for a discharge from their “qualifying debts” (i.e. debts which are liquidated,
unsecured and not excluded debts and up to Rs.35,000). The resolution
professional will investigate and prepare a final list of all qualifying debts
within 180 days from the date of application. On the expiry of this period, the
Adjudicating Authority will pass an order on discharging of the debtor from the
qualifying debts and accord an opportunity to the debtor to start afresh,
financially.
b.
In the
Insolvency Resolution Process, the creditors and the debtor will engage in
negotiations to arrive at an agreeable repayment plan for composition of the
debts and affairs of the debtor, supervised by a resolution professional.
c. The
bankruptcy of an individual can be initiated only after the failure of the
resolution process. The bankruptcy trustee is responsible for administration of
the estate of the bankrupt and for distribution of the proceeds on the basis of
the priority.
vii. Transition Provision: The draft Bill lays
down a transition provision during which the Central Government shall exercise
all the powers of the Regulator till the time the Regulator is established.
This transition provision will enable quick starting of the process on the
ground without waiting for the proposed institutional structure to develop.
viii. Transfer
of proceedings: Any proceeding pending before the AAIFR or the BIFR
under the SICA, 1985, immediately before the commencement of this law shall
stand abated. However, a company in respect of which such proceeding stands
abated may make a reference to Adjudicating Authority within 180 days from the
commencement of this law
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