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The Committee has had the benefit of consideration of such initiatives.Occasionally, a doubt is expressed as to whether developing countries should consider incorporation of such legal frameworks.The present framework does not provide a balanced resolution of various stakeholder issues, is time consuming and inefficient.

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In fact recent times have shown possibility of growth by entrepreneurs, some of them Indian, who have become dominant business entities internationally by achieving turnaround of sick firms and revitalization of dormant capacities. The Indian system provides neither an opportunity for speedy and effective rehabilitation nor for an efficient exit.

The process for rehabilitation, regulated by the Sick Industrial Companies (Special Provisions) Act 1985 through the institutional structure of BIFR is amenable to delays and does not provide a balanced or effective framework for all stakeholders.

The process of liquidation and winding up is costly, inordinately lengthy and results in almost complete erosion of asset value. The Committee noted that a beginning towards reform was made with the enactment of Companies (Second Amendment) Act, 2002, which in addition to significant changes in the restructuring and liquidation provisions provided for the setting up of a new institutional structure in the form of the National Company Law Tribunal (NCLT)/Tribunal and its Appellate Body, the National Company Law Appellate Tribunal (NCLAT).

However, the process is not complete and a lot yet needs to be done.

Insolvency Law 6.1 An effective insolvency system is an important element of financial system stability.

It is, therefore, essential to provide for a sound framework for restructuring and rehabilitation of companies along with a framework for winding up and liquidation.

It should provide an opportunity for genuine effort to explore restructuring/ rehabilitation of potentially viable businesses with consensus of stake holders reasonably arrived at.

Where revival / rehabilitation is demonstrated as not being feasible, winding up should be resorted to.

Special care should be taken to ensure that this is not misused by any stakeholder to delay proceedings, strip asset value or otherwise work to the detriment of the business and other stakeholders.

Time bound proceedings 9.1 A definite and predictable time frame should be provided for attempt at rehabilitation and for the liquidation process.

Such lengthy time-frames are detrimental to the interest of all stakeholders.

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