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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.”

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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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