{"id":35280,"date":"2018-10-31T16:13:01","date_gmt":"2018-10-31T10:43:01","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=35280"},"modified":"2018-10-31T16:13:01","modified_gmt":"2018-10-31T10:43:01","slug":"welcome-support-for-the-new-bankruptcy-law","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/welcome-support-for-the-new-bankruptcy-law\/","title":{"rendered":"Welcome Support for the New Bankruptcy Law:\u00a0"},"content":{"rendered":"<p><a href=\"http:\/\/www.livemint.com\/Opinion\/6gSdz0mzfBPpdNsIgtg3VO\/Welcome-support-for-the-new-bankruptcy-law.html\">Welcome Support for the New Bankruptcy Law<\/a>:<\/p>\n<p><strong>Context<\/strong><\/p>\n<ul>\n<li>In a powerful statement, the Supreme Court has instructed all lower courts to take into account the fact that the Insolvency and Bankruptcy Code, 2016 constitutes a paradigm shift.<\/li>\n<\/ul>\n<p><strong>Introduction<\/strong><\/p>\n<ul>\n<li>The recent court ruling in the case between ICICI Bank and Innoventive Industries has come at a time when the Indian central bank has forced lenders to move against large loan defaulters.<\/li>\n<\/ul>\n<p><strong>What is the issue?<\/strong><\/p>\n<ul>\n<li>The private sector lender had initiated insolvency proceedings against the company because it defaulted on its loan commitments.<\/li>\n<\/ul>\n<p><strong>What does Supreme Court judgement signify?<\/strong><\/p>\n<ul>\n<li>The Supreme Court judgement clearly states that the Insolvency and Bankruptcy Code, 2016 overrides the confusing maze of state laws that companies could use in the future to avoid insolvency.<\/li>\n<li>Justice R.F. Nariman and Justice Sanjay Kishan Kaul have cited Article 54 of the Constitution to say that a Central law should prevail over state law whenever the two are contradictory.<\/li>\n<li>The court ruling comes even as the Reserve Bank of India (RBI) has asked banks to move against another 28 large defaulters.<\/li>\n<li>The central bank action is a clear signal that regulatory forbearance is not an option given the mounting bad loans that now constitute the biggest risk to economic stability.<\/li>\n<li>Such firm action is now possible because the Insolvency and Bankruptcy Code empowers creditors for the first time ever.<\/li>\n<\/ul>\n<p><strong>Report by the committee<\/strong><\/p>\n<ul>\n<li>The Supreme Court has liberally quoted parts of the report by the committee that worked on the reform of Indian bankruptcy law.<\/li>\n<li>The limited liability company is a contract between equity and debt.<\/li>\n<li>Equity owners are in full control as long as debt obligations are met.<\/li>\n<li>Creditors have no say in how the company is run. The situation flips in case of a default. Control should then be passed to creditors. Equity owners have no say.<\/li>\n<li>Weak protection for creditors means that they are averse to lending.<\/li>\n<li>At least some part of the credit constraints in India can be traced back to this problem.<\/li>\n<li>The growth of a corporate bond market is also held back by the lack of a modern bankruptcy framework.<\/li>\n<li>The control of a defaulting company should be transferred to the creditors.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Welcome Support for the New Bankruptcy Law: Context In a powerful statement, the Supreme Court has instructed all lower courts to take into account the fact that the Insolvency and Bankruptcy Code, 2016 constitutes a paradigm shift. Introduction The recent court ruling in the case between ICICI Bank and Innoventive Industries has come at a&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/welcome-support-for-the-new-bankruptcy-law\/\">Continue reading <span class=\"screen-reader-text\">Welcome Support for the New Bankruptcy Law:\u00a0<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-35280","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704716547},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/35280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=35280"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/35280\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=35280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=35280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=35280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}