Government Moves Towards Long-Awaited Bankruptcy Reform with Draft Bill

Mumbai: The government on Wednesday published long-awaited proposals to overhaul an outdated and overburdened bankruptcy process, calling for public comment on what could become the country's first unified bankruptcy code.

The proposed bill aims to dramatically speed up decisions on whether to save or liquidate ailing companies, in a move to curb asset stripping and ensure higher recovery rates for creditors - both key to fostering a modern credit market and increased investment in India.

Currently, according to the report published on Wednesday, lenders recover a paltry 20 per cent of the value of debt.

If adopted, the changes would bring in "insolvency professionals" to run the resolution process, and set up creditor committees to reach a verdict on an ailing company's future in up to 180 days, removing government involvement and ending decades of judicial gridlock.

The group of experts who drafted the proposed changes, first reported in full by Reuters last week, said a speedier resolution would also help increase the number of firms that can be restructured, rather than liquidated.

Comments and suggestions are due by November 19, after which the government will take a decision on the report and introduce it in parliament. Committee members told Reuters last week that the bill could be passed in the budget session, early next year.