A Comparative Study of US EU and Indian Corporate Rehabilitation and Insolvency Laws

Abstract

In Indian scenario, 11% of the loans provided sums up to formulate bad loans and is only increasing with time. When compared to other economies that are experiencing growth, the duration required to resolve bankruptcy matters significantly, giving the impression that the country ranks poorly when it comes to business facilitation and insolvency-related matters. Of the total bad debts of national banks, 56% are composed of corporate bad loans. There are numerous cases that are still due regarding cash recovery, regulatory arbitrage, and the overlap between the laws governing insolvency administration and the courts. There were about twelve bankruptcy statutes in effect prior to this juncture. Statistics indicate that under the present structure, it takes longer than the standard four years to wind up a corporation in India. This unambiguously demonstrates that India lacks the proper institutional framework and legal mechanism to handle debt defaults in accordance with international standards. The recovery processes used by lending agencies, whether governed by the Contracts Act or special legislation such as the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, have not produced the desired outcomes. Similarly, neither the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) nor the Companies Act, 1956's winding up provisions have been able to effectively assist in the recovery of unpaid debt or the reconstruction of obligations. The Provincial Insolvency Act of 1920 and the Presidency Towns Insolvency Act of 1909, which regulate individual insolvency, are almost extraordinarily older.