Close on the heels of the enactment of the Insolvency and Bankruptcy Code earlier this year for non-financial firms, the government on Wednesday unveiled a Bill to establish a special resolution regime for financial firms.
The Financial Resolution and Deposit Insurance Bill, 2016 proposes that upon an application by a new resolution authority (called Resolution Corporation), the National Company Law Tribunal will have to pass an order of liquidation within 14 days of application and appoint the Corporation as a liquidator. Tribunal’s order can be appealed in the Supreme Court on a question of law within 45 days of the above ruling.
The Bill consolidates the existing laws relating to resolution of certain categories of financial institutions including banks, insurance companies, financial market infrastructures, payment systems, and other financial service providers (excluding individuals and partnership firms) 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 empower the Corporation to contribute to the stability and resilience of the financial system by carrying out speedy and efficient resolution of financial firms in distress, providing deposit insurance to consumers of certain categories of financial services, monitoring the Systemically Important Financial Institutions; and protecting the consumers of financial institutions and public funds to the extent possible. The Bill also provides for certain special provisions in relation to resolution of central counterparties because of their unique status in the financial system.
In the latest budget, finance minister Arun Jaitley had announced the government’s plan to bring a new Bill on resolution of financial firms. This proposed law, together with the Insolvency and Bankruptcy Code, will provide a comprehensive resolution mechanism for the economy. Public can send their comments on the new Bill latest by October 14, 2016.
-The National Company Law Tribunal shall pass an order of liquidation within 14 days of application
-Tribunal order can be appealed in the Supreme Court on a question of law within 45 days
-Resolution Corporation to receive/collect the claims of all consumers and creditors within a period of ninety days from the date of the commencement of the liquidation process