With reference to Debashis Basu's "Bankruptcy law: state - 1; market - 0" (May 16), there has been no dearth of laws in this country. The big question is about their implementation. First, while the bankruptcy law has been passed with praiseworthy speed, its implementation may take another 12 months. By that time our clever promoters would have either put up sufficient barriers or zeroed in on primary and collateral securities leaving a heap of grass to lenders.
Second, it is not very clear how this law will cover various cases of default before the courts of law including debt recovery tribunals. It is not that easy to bring all these cases under the ambit of the new legislation. Third, why the government has prioritised workers' dues in the settlement process? Workers' dues will pose several issues of interpretation. Fourth, in many cases the assets left with the lenders in bankruptcy proceedings would form a minuscule part of the total dues. Lenders will be baffled when they stare at huge losses even after realising primary/collateral securities.
Finally, I fully agree with the writer that with the state machinery overtaking market mechanism in implementing the new legislation, the entire recovery process would get bureaucratised and make lenders a helpless lot. Lenders would be at the mercy of "government babus". If corruption takes over the post-bankruptcy period, it would be a deadly combination of dominant babus, advantaged promoters and poor lenders. In the circumstances, are lenders not back to square one?
K V Rao Bengaluru
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