 "Insolvency law changes were delayed for 56 yrs: Bhupender Yadav")
Bhupender Yadav, a Supreme Court advocate and Bharatiya Janata Party (BJP) member in the Rajya Sabha, has become the government's go-to man to head important parliamentary committees to study key legislation. He has headed six such panels, including for Bills such as those on Mines and Minerals (Development and Regulation), Insolvency and Bankruptcy Code, Enemy Property and now the Joint Committee on the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016. Yadav tells Sahil Makkar, Ishan Bakshi and Archis Mohan about the changes the passage of the Bankruptcy Code will bring about. Edited excerpts:
How is it that reports of the committees you have headed, particularly the one on the Bankruptcy Code, didn't have a single dissenting note in a political atmosphere where the government and the Opposition have accused each other either of obstructionism or unilateralism?
Every political party has its own way of running the country but everyone's objective is the same - the welfare of our people. We never stopped any member of the committee from giving their dissenting note. For the Bankruptcy Code, everyone worked hard and contributed well. It also helps that committee meetings are held away from the media gaze and members can speak their mind. The committee members showed immense commitment to contribute to its proceedings.
Parliament has set up a joint committee to review the Sarfaesi Act and the Debt Recovery Tribunal (DRT) Act as part of the government's ongoing banking reforms. The committee will submit its report after examining all the issues in the first week of the next parliamentary session.
How will the transition from the Sarfaesi Act to the Bankruptcy Act take place, given the large number of pending cases before the tribunals?
I cannot comment on the terms of references of the committee or share the discussions of the committee before it finalises its report and submits it to Parliament.
A World Bank report has said India is worse than Pakistan when it comes to closing down a business. On average the entire process to wind up takes up to five years in India....
Ease of doing business is a key challenge in India and our government has accepted it in a positive manner. The government has simplified the processes related to exports and imports. Micro, small and medium enterprises (MSME) have been given identification numbers. A key aspect was the passing of the Insolvency and Bankruptcy Code, 2016. Before this Bill was passed, personal insolvency was dealt according to the 1920 Act; sick companies were dealt by the Board for Industrial and Financial Reconstruction; high courts would deal with companies going for liquidation; the Sarfaesi Act would deal with secured assets. Other assets would be dealt by DRTs. A company in distress would face litigation in at least five to six places for which there was no time limit.
Now there are two aspects of the new mechanism that the government has brought about. First, deals with personal and private partnership firms; second, for corporate firms. The DRT will deal with the first case, the National Company Law Tribunal (NCLT) will handle cases of companies. Professionals appointed by the tribunals will take care of the financial and operational matters. There is a waterfall mechanism in the new Act defining who will get the first payment. The entire process will take 180 days and yield good results if implemented well.
Currently, there is a dearth of experts and professionals to implement it....
As far as manpower is concerned we have the entire new establishment of the NCLT and there are two million lawyers in the country. Then we have chartered accountants, company secretaries, cost accountants and MBAs.
But they don't have the expertise....
The expertise will come. We have to see how we can use them. We have an army of competent professionals. What is needed is to bring them on a joint platform.
Will it help India improve its ranking with regard to ease of doing business, particularly when much of the reforms are to be carried out by state governments?
Overall, the government has performed well in the past two years. The 12-point increase in the ranking of ease of doing business is the highest thus far.
Our focus is policy, accountability, transparency and efficiency. This is a decision making government. The government has given a new vision through its initiatives to encourage start-ups. This new vision is self-attestation, tax exemption and self-regulation. The government brought the bankruptcy law.
The other aspect is economic inclusion of deprived sections of society. We have launched Stand-Up India. We have opened 29 sectors under Make in India, and within these sectors we have opened 100 per cent foreign direct investment in defence and railways. We have prepared a schedule for refinancing under the MUDRA Bank scheme for small entrepreneurs. A big achievement in the MSME sector is the single-window system for new registrations.
Will the Bankruptcy Code help recover debt from the likes of Vijay Mallya?
The graph of non-performing assets of banks went down till 2008-09 and then started to rise. This is because of the policies of the Congress-led United Progressive Alliance (UPA) government. A Law Commission of India report suggested amendments to the insolvency law framed in the 1960s. But we have had to wait for the amended law until 2016!
How has the Micro Units Development and Refinance Agency (MUDRA) Bank helped empower marginalised sections of society, like women and Dalits?
The last two years' data show that 79 per cent of beneficiaries in the MUDRA scheme and 55 per cent of beneficiaries in the MGNREGA are women. The area of rural sanitation rose from 42 per cent to 52 per cent. These are the big achievements. Other than women, Scheduled Castes, Scheduled Tribes, Other Backward Classes and minority communities have benefited from MUDRA. On a broad scale, the government worked on three major issues: first, to ensure access of the poor to financial institutions. About 220 million bank accounts were opened. Second, to bring people into the safety net through schemes such as crop insurance and Atal Pension Yojana. Third, MUDRA loans gave a leg-up to those who were otherwise not getting it from other avenues.
MGNREGA payments, or so some complain, have been delayed for more than a year....
That is why the government decided to link MGNREGA with the Direct Benefits Transfer scheme. The biggest issue in the MGNREGA during the UPA government's rule was the opening of fake accounts.
What is the state of repayment of MUDRA Bank loans?
You minimise Ponzi schemes and the poor's reliance on usurious moneylenders when you trust the poor and give them access to financial services. I feel the recovery of loans given to the poor is more than 90 per cent. It is difficult to recover from those who take loans for luxury, but those who take them for their livelihood show much more commitment about repayment because the business they have started is linked to their survival.
How is it that reports of the committees you have headed, particularly the one on the Bankruptcy Code, didn't have a single dissenting note in a political atmosphere where the government and the Opposition have accused each other either of obstructionism or unilateralism?
Every political party has its own way of running the country but everyone's objective is the same - the welfare of our people. We never stopped any member of the committee from giving their dissenting note. For the Bankruptcy Code, everyone worked hard and contributed well. It also helps that committee meetings are held away from the media gaze and members can speak their mind. The committee members showed immense commitment to contribute to its proceedings.
Also Read
What are the terms and references of the committee on Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act?
Parliament has set up a joint committee to review the Sarfaesi Act and the Debt Recovery Tribunal (DRT) Act as part of the government's ongoing banking reforms. The committee will submit its report after examining all the issues in the first week of the next parliamentary session.
How will the transition from the Sarfaesi Act to the Bankruptcy Act take place, given the large number of pending cases before the tribunals?
I cannot comment on the terms of references of the committee or share the discussions of the committee before it finalises its report and submits it to Parliament.
A World Bank report has said India is worse than Pakistan when it comes to closing down a business. On average the entire process to wind up takes up to five years in India....
Ease of doing business is a key challenge in India and our government has accepted it in a positive manner. The government has simplified the processes related to exports and imports. Micro, small and medium enterprises (MSME) have been given identification numbers. A key aspect was the passing of the Insolvency and Bankruptcy Code, 2016. Before this Bill was passed, personal insolvency was dealt according to the 1920 Act; sick companies were dealt by the Board for Industrial and Financial Reconstruction; high courts would deal with companies going for liquidation; the Sarfaesi Act would deal with secured assets. Other assets would be dealt by DRTs. A company in distress would face litigation in at least five to six places for which there was no time limit.
Now there are two aspects of the new mechanism that the government has brought about. First, deals with personal and private partnership firms; second, for corporate firms. The DRT will deal with the first case, the National Company Law Tribunal (NCLT) will handle cases of companies. Professionals appointed by the tribunals will take care of the financial and operational matters. There is a waterfall mechanism in the new Act defining who will get the first payment. The entire process will take 180 days and yield good results if implemented well.
Currently, there is a dearth of experts and professionals to implement it....
As far as manpower is concerned we have the entire new establishment of the NCLT and there are two million lawyers in the country. Then we have chartered accountants, company secretaries, cost accountants and MBAs.
But they don't have the expertise....
The expertise will come. We have to see how we can use them. We have an army of competent professionals. What is needed is to bring them on a joint platform.
Will it help India improve its ranking with regard to ease of doing business, particularly when much of the reforms are to be carried out by state governments?
Overall, the government has performed well in the past two years. The 12-point increase in the ranking of ease of doing business is the highest thus far.
Our focus is policy, accountability, transparency and efficiency. This is a decision making government. The government has given a new vision through its initiatives to encourage start-ups. This new vision is self-attestation, tax exemption and self-regulation. The government brought the bankruptcy law.
The other aspect is economic inclusion of deprived sections of society. We have launched Stand-Up India. We have opened 29 sectors under Make in India, and within these sectors we have opened 100 per cent foreign direct investment in defence and railways. We have prepared a schedule for refinancing under the MUDRA Bank scheme for small entrepreneurs. A big achievement in the MSME sector is the single-window system for new registrations.
Will the Bankruptcy Code help recover debt from the likes of Vijay Mallya?
The graph of non-performing assets of banks went down till 2008-09 and then started to rise. This is because of the policies of the Congress-led United Progressive Alliance (UPA) government. A Law Commission of India report suggested amendments to the insolvency law framed in the 1960s. But we have had to wait for the amended law until 2016!
How has the Micro Units Development and Refinance Agency (MUDRA) Bank helped empower marginalised sections of society, like women and Dalits?
The last two years' data show that 79 per cent of beneficiaries in the MUDRA scheme and 55 per cent of beneficiaries in the MGNREGA are women. The area of rural sanitation rose from 42 per cent to 52 per cent. These are the big achievements. Other than women, Scheduled Castes, Scheduled Tribes, Other Backward Classes and minority communities have benefited from MUDRA. On a broad scale, the government worked on three major issues: first, to ensure access of the poor to financial institutions. About 220 million bank accounts were opened. Second, to bring people into the safety net through schemes such as crop insurance and Atal Pension Yojana. Third, MUDRA loans gave a leg-up to those who were otherwise not getting it from other avenues.
MGNREGA payments, or so some complain, have been delayed for more than a year....
That is why the government decided to link MGNREGA with the Direct Benefits Transfer scheme. The biggest issue in the MGNREGA during the UPA government's rule was the opening of fake accounts.
What is the state of repayment of MUDRA Bank loans?
You minimise Ponzi schemes and the poor's reliance on usurious moneylenders when you trust the poor and give them access to financial services. I feel the recovery of loans given to the poor is more than 90 per cent. It is difficult to recover from those who take loans for luxury, but those who take them for their livelihood show much more commitment about repayment because the business they have started is linked to their survival.