QUESTION : Do you think Insolvency and Bankruptcy Code (Amendment) Bill ,2019 can emerge as the lynchpin for resolving stressed assets in a time-bound manner? Critically analyse
Topic- TRANSFORMING BUSINESS AND THE INSOLVENCY SYSTEM
WHAT ?
Insolvency And Bankruptcy Code (IBC)
WHY IN NEWS ?
he Prime Minister mentioned the Insolvency and Bankruptcy Code (IBC 2016) as one of the key legislative reforms that would help aid India’s path to self-reliance on a high growth trajectory.
INTRODUCTION :
- The Insolvency and Bankruptcy Code, along with the Goods and Services Tax regime, among other key reforms, were helping in significantly improving the ease of doing business in India and enabling it to emerge as a ‘Make for World’ platform.
- IBC is credited for a surge in Foreign Direct Investment into India in 2019-2020, to the tune of nearly $74.5 billion, or a significant increase of 20 per cent from the previous year
WHAT IS INSOLVENCY AND BANKRUPTCY ?
Insolvency is a situation where individuals or companies are unable to repay their outstanding debt.
Bankruptcy, on the other hand, is a situation whereby a court of competent jurisdiction has declared a person or other entity insolvent, having passed appropriate orders to resolve it and protect the rights of the creditors. It is a legal declaration of one’s inability to pay off debts
Thus, an individual/entity can be insolvent without being bankrupt and insolvency can lead to bankruptcy if the insolvent individual/entity is unable to overcome the financial catastrophe.
INSOLVENCY AND BANKRUPTCY CODE,2016 :
- The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
- Insolvency Resolution: The Code outlines separate insolvency resolution processes for individuals, companies and partnership firms.
- The process may be initiated by either the debtor or the creditors.
- The code aims to protect the interests of small investors and make the process of doing business less cumbersome.
- Insolvency regulator: The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it. The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the Reserve Bank of India.
- The Code provides a time-bound 180-day process to resolve insolvency of companies and individuals.
INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) BILL,2019 :
- The Bill amends the Insolvency and Bankruptcy Code, 2016.
- Under the Code, a financial creditor may file an application before the National Company Law Tribunal (NCLT) for initiating the insolvency resolution process.
- The NCLT must find the existence of default within 14 days.
- Thereafter, a Committee of Creditors (CoC) consisting of financial creditors will be constituted for taking decisions regarding insolvency resolution.
- The CoC may either decide to restructure the debtor’s debt by preparing a resolution plan or liquidate the debtor’s assets.
- The Bill addresses three issues.
First, it strengthens provisions related to time-limits. Second, it specifies the minimum payouts to operational creditors in any resolution plan. Third, it specifies the manner in which the representative of a group of financial creditors (such as home-buyers) should vote.
SIGNIFICANCE OF THE IBC :
- The IBC has been a far-ranging and structurally significant reform that has transformed insolvency resolution in India.
- Replacing a rather inefficient bankruptcy law regime, the IBC has focused on time-bound resolution, rather than liquidation, as an empowering tool to support companies falling within its ambit.
- It has successfully instilled confidence in the corporate resolution methodology, and perhaps, more importantly, on creating a possibility for the creditors recouping some of their investments in firms being liquidated or going in for resolution.
- Its core implication has been to allow credit to flow more freely to and within India while promoting investor and investee confidence.
- Despite the suspension of the IBC for a limited duration due to the COVID 19 pandemic, in the short, medium and long term, it will prove to have been a timely reform.
- The IBC has provided a major stimulus to ease of doing business, enhanced investor confidence, and helped encourage entrepreneurship while also providing support to MSMEs.
- Its further streamlining and strengthening will surely instil greater confidence in both foreign and domestic investors as they look at India as an attractive investment destination.
MEASURES TAKEN BY THE GOI :
- Criminal penalties: The Government of India is also working toward decriminalisation of minor offences.
- NITI Aayog is playing an active role in this exercise, which will reduce the risk of imprisonment for actions or omissions that are not necessarily fraudulent or an outcome of mala fide intent.
- Other legislative measures include the rolling out of the commercial courts, commercial divisions and the Commercial Appellate Divisions Act, 2015, to allow district court-level commercial courts, and the removing of over 1,500 obsolete and archaic laws.
- Together with the IBC, these highlight a major and multi-dimensional effort by the government to provide comfort, relief and reliability to the potential investors.
- The Ministry of Corporate Affairs along with Insolvency and Bankruptcy Board of India (IBBI), are working diligently on putting in place a Micro, Small and Medium Enterprises (MSME) and non-MSME framework to help expedite this process.
- Through the IBBI, it has established an unprecedented organisation that both regulates and develops insolvency policy, and assesses market realities.
CHALLENGES :
- India suffers from a serious backlog in court cases, to the tune of nearly four crore matters pending final judgment. The novel coronavirus pandemic is likely to exacerbate this.
- The enforceability of contracts has been a challenge. On an average, it takes as many as 1,445 days for a contract to be enforced, and that too at a cost of nearly 31% of the claim value.
- The report of the Bankruptcy Law Reforms Committee speaks of the critical need for speed in the working of the bankruptcy code.
- It is clear that the inability to make significant decisions without full clarity of ownership and control delays resolution.
- And, the longer the delay, the more likely that the entity in question would move towards liquidation rather than resolution.
- The delays result in low value liquidation due to a high economic rate of depreciation. Higher value stems from the firm being acquired as a going concern.
SUGGESTIONS :
- Two key drivers for the IBC are relatively short time-bound processes, and the focus on prioritising resolution rather than liquidation.
- There could perhaps be a look at institutionalising the introduction of a pre-packed insolvency resolution process, the need for which is highlighted by the necessary suspension of the IBC proceedings.
- It will also help resolve matters expeditiously, outside of the formal court system, and allow resolution even during the COVID-19 altered reality.
- Bringing in technology would help ease of access to justice and greatly help ease of doing business from a process and efficiency standpoint as well.
WAY FORWARD :
- There is need for setting up more tribunals in different parts of the country to handle the greater-than-expected volume of cases.
- IBC must consider that there are distinct advantages if the existing management is allowed to keep running the company such as knowledge, information and expertise.
- India is more concerned with the recovery of NPA, not with the running of units, thus the first priority is to save the banking system.
- Thus the banks also must push policy makers towards this move because they’re unlikely to get more if the case comes before the NCLT.
- Proactive training/onboarding of judges, lawyers, and other intermediaries will be necessary for effective implementation of the code.
- Technological infrastructure needs to be strengthened to avoid any kind of data loss and to maintain confidentiality. There is a requirement of enhanced IU infrastructure.
CONCLUSION :
This will help companies that need last mile funding to access a wider pool of capital that caters to this requirement and should also enable such funding on competitive terms bute government have to work with the intent to help differentiate between good faith mistakes and intentional bad faith actions, so as to penalise the former, and criminalise the latter.
QUESTION : Examine and review the safeguards provided by National Commission for Protection of Child Rights (NCPCR) and challenges faced by NCPCR while dealing child crimes.
Topic- A COMMISSION MISGUIDED
WHAT ?
The National Commission For Protection Of Child Rights (NCPCR)
WHY IN NEWS ?
We note with great concern some of the recent actions of the Commission that suggest a grave departure from its primary duty to ensure the well-being of all children, especially children in need of care and protection.
KEY HIGHLIGHTS ABOUT NCPCR :
- The National Commission for the Protection of Child Rights (NCPCR) was set up in March 2007 under the Commissions for Protection of Child Rights (CPCR) Act, 2005, an Act of Parliament.
- National Commission for the Protection of Child Rights (NCPCR) is a statutory body under the Commissions for Protection of Child Rights (CPCR) Act, 2005 under the administrative control of the Ministry of Women & Child Development ,Government of India.
- The Commission’s Mandate is to ensure that all Laws, Policies, Programmes, and Administrative Mechanisms are in consonance with the Child Rights perspective as enshrined in the Constitution of India and also the UN Convention on the Rights of the Child.
- Under the NCPCR the Child is defined as a person in the 0 to 18 years age group.
- The Commission visualizes a rights-based perspective flowing into National Policies and Programmes, along with nuanced responses at the State, District and Block levels, taking care of specificity and strengths of each region.
- In order to touch every child, it seeks a deeper penetration to communities and households and expects that the ground experiences gathered at the field are taken into consideration by all the authorities at the higher level.
- Thus the Commission sees an indispensable role for the State, sound institution-building processes, respect for decentralization at the local bodies and community level and larger societal concern for children and their well-being
FUNCTIONS AND POWES :
- Examine and review the safeguards provided by or under any law for the time being in force for the protection of child rights and recommend measures for their effective implementation.
- Present to be central government, annually and at such other intervals, as the commission may deem fit, reports upon working of those safeguards;
- Inquire into violation of child rights and recommend initiation of proceedings in such cases;
- Examine all factors that inhibit the enjoyment of rights of children affected by terrorism, communal violence, riots, natural disaster, domestic violence, HIV/AIDS, trafficking, maltreatment, torture and exploitation, pornography and prostitution and recommend appropriate remedial measures;
- Look into matters relating to children in need of special care and protection, including children in distress, marginalised and disadvantaged children, children in conflict with law, juveniles, children without family and children of prisoners and recommend appropriate remedial measures.
- Study treaties and other international instruments and undertake periodic review of existing policies, programmes, and other activities on child rights and make recommendations for their effective implementation in the best interest of children.
- Undertake and promote research in the field of child rights.
- Spread child rights literacy among various sections of society and promote awareness of the safeguards available for protection of these rights through publications, media, seminars and other available means.
- Inspect or cause to be inspected any juvenile custodial home or any other place of residence or institution meant for children,
- Inquire into complaints and take suo moto notice of matters related to:
- Deprivation and violation of child rights.
- Non implementation of laws providing for protection and development of children.
- Non compliance of policy decisions, guidelines or instructions aimed at mitigating hardships to and ensuring welfare of the children and to provide relief to such children
CHILD RIGHTS :
According to the United Nations Convention on the Rights of the Children – that India ratified in 1992 – all children are born with fundamental rights.
- Right to Survival – to life, health, nutrition, name, nationality
- Right to Development – to education, care, leisure, recreation, cultural activities
- Right to Protection – from exploitation, abuse, neglect
- Right to Participation – to expression, information, thought, religion
The four basic principles on which these above mentioned rights are based are:
- Non-discrimination (Article 2)
- Best Interest of the Child (Article 3)
- Right to Life Survival and Development (Article 6)
- Respect for the views of the child (Article 12): Children have the right to voice their opinions and have these be taken into account in decisions that affect them.
CONSTITUTIONAL AND INSTITUTIONAL SAFEGUARDS :
Fundamental Rights
- Article 14- The State shall not deny to any person equality before the law or the equal protection of laws with in the territory of India.
- Article 15- The State shall not discriminate against any citizen. Nothing in this Article shall prevent the State from making any special provisions for women and children.
- Article 21- No person shall be deprived of his life or personal liberty except according to procedure established by law.
- Article 21 A- The State shall provide free and compulsory education to all children of the age of 6-14 years in such manner as the State may, by law, determine.
- Article 23- Traffic in human beings and beggary and other forms of forced labour are prohibited and any contravention of this provision shall be an offence punishable in accordance with the law.
- Article 24- No child below the age of 14 years shall be employed to work in any factory or mine or engaged in any other hazardous employment.
- The Constitution (86th Amendment) Act was notified on 13th December 2002, making free and compulsory education a Fundamental Right for all children in the age group of 6-14 years.
Directive Principles
- Article 39(e) & (f) direct that the state policies are directed towards securing the tender age of children.
- Article 45 states that the state shall endeavor to provide early childhood care and education for all children until they complete the age of six years.
- Article 47- The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties
- Article 51A mentions that it shall be the fundamental duty of the parent and guardian to provide opportunities for education to his child or as the case may be, ward between the age of six and fourteen.
- Article 243G read with Schedule 11 – provide for institutionalization of child care by seeking to entrust programmes of Women and Child Development to Panchayat (Item 25 of Schedule 11), apart from education (item 17), family welfare (item 25), health and sanitation (item 23) and other items with a bearing on the welfare of children.
CHALLENGES FOR CHILDREN IN INDIA :
- HUNGER
- MORTALITY
- CHILD LABOUR
- SEXUAL ASSAULT
- HEALTH EDUCATION AND NUTRITION
MAJOR CONCERNS :
- Amongst its significant powers and duties, the NCPCR has been specifically charged with the monitoring of Child Care Institutions (CCIs) and was instructed to carry out a social audit of the same by the Supreme Court.
- Civil society organisations have raised several obvious concerns about this, especially because most of these children are in CCIs due to abusive conditions in the family.
- A mandated repatriation without an adequate case-by-case assessment plan within a short period of time would likely place the children again at grave risk of abuse, exploitation and neglect.
- They also point to the sheer inadequacy of current systems to organise adoption and foster care.
- Not only is monitoring of the FCRA regulations outside of the mandate of the NCPCR, but the raids also seem to target individuals who have been outspoken in the criticism of the Central government on issues such as the National Register of Citizens and the Citizenship (Amendment) Act.
STEPS TO BE TAKEN :
- We would have expected the NCPCR to show concern for the gross violation of children’s rights during the lockdown and in its aftermath.
- The NCPCR could have used its authority and power to issue recommendations to relieve these grave conditions by reiterating the need for strengthening all child-related institutions (government and non-government) through adequate funds, and appreciating the relief measures that many civil society organisations, including the ones being raided and instructed to close down, were engaged in.
- We would have expected the NCPCR to exhibit its priorities better by taking suo motu cognisance of the rape and murder of a 14-year-old girl in Bhadohi in Uttar Pradesh.
- It should have made a test case of the lack of systems to fight crimes against children instead of moving to undermine and dismantle whatever little does exist for their protection.
GOVERNMENT INITIATIVES AGAINST CHILD SEXUAL ABUSE :
Integrated Child Development Services (ICDS):
Anganwadi Services: holistic development of children under the age of six years, pregnant women and lactating mothers.
Scheme for Adolescent Girls: facilitate, educate and empower adolescent girls.
Child Protection Services: provide safe and secure environment for children through a wide range of social protection measures.
National Crèche Scheme: providing a safe place for mothers to leave their children while they are at work.
National Commission for Protection of Child Rights (NCPCR): Ensures that all Laws, Policies, Programmes, and Administrative Mechanisms are in consonance with the Child Rights perspective as enshrined in the Constitution of India and also the UN Convention on the Rights of the Child.
Please note: The Child is defined as a person in the 0 to 18 years age group.
Protection of Children from Sexual Offences Act (POCSO Act): Protect children from offenses of sexual abuse, sexual harassment and pornography and provide a child-friendly system for the trial of these offences.
Pan-India expansion of Beti Bachao Beti Padhao: Address the declining Child Sex Ratio (CSR) and address other related issues of disempowerment of women.
One Stop Centres(OSCs): Single window for women to a range of services including access to police, medical, legal and psychological support and temporary shelter.
WAY AHEAD :
- Strengthen the reporting mechanism on violence against children by making it more accessible to children.
- Develop a framework for protection of children from online abuse and ensuring privacy, safety and confidentiality of data shared on digital platforms.
- Enhance financial investment on child protection components
- Sensitise parents, service providers and community for early identification and management of children facing abuse and violence; and sensitisation of children, parents and caregivers on gender issues.
- Create awareness amongst children on safe usage of online platforms and protection from cyber abuse.
- Strengthen the juvenile justice system in India and provide care, support and rehabilitation to survivors, particularly of sexual violence.
- Ensure safe schools by integrating safe school principles in curricula, conduct awareness raising workshops and develop capacities of teachers and other staffs
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