The Personal Bankruptcy (Declaration and Rehabilitation) Bill, 2015 #indianlaws

The proposed legislation focuses upon the Declaration of bankruptcy and the process of Rehabilitation of such person in the backdrop of the term “Willful defaulter”. The major importance of this word is that a person cannot file for bankruptcy if he is a willful defaulter, which as defined in Clause 2 (f) means any debtor who do not repay the debt despite adequate liquidity. Such person accordingly would not be entitled for Rehabilitation. 

This Bill was introduced in the Parliament this year with a view “to provide for mechanism through which a person unable to pay off debts can declare bankruptcy and subject himself to rehabilitation and for matters connected therewith and incidental thereto”, as is mentioned in the Bill. The proposed legislation focuses upon the Declaration of bankruptcy and the process of Rehabilitation of such person in the backdrop of the term “Willful defaulter”. The major importance of this word is that a person cannot file for bankruptcy if he is a willful defaulter, which as defined in Clause 2 (f) means any debtor who do not repay the debt despite adequate liquidity. Such person accordingly would not be entitled for Rehabilitation. 

The proposed legislation vide clauses 8 and 9 defines that only people with genuine problem of liquidity can avail the benefits of the provisions under the legislation and not those who are the habitual defaulters. 
The legislation provides for a mechanism under which debts of the bankruptperson can be cleared. Clause 5 provides that a trustee in such circumstances would be appointed to carry out the whole process of clearing the debts, which has been dealt with in clauses 14 & 15. The “whole process” for the purposes of legislation elaborates on how within 3 months (as the period mentioned) the trustee will convert all the assets of the debtor (subject to exemptions as specified therein) into liquid money, followed by clearing the debts based on the preference list so provided for in the proposed legislation. However, even otherwise, if something has skipped the preference list, the legislation insist that no secured debt shall remain unpaid. Upon the completion of above mentioned process, certificate of discharge will be released in the debtors benefit liberating him from any debts (except for govt. debts etc.).

The second limb or feature of the proposed legislation is that it provides for Rehabilitation of the debtor coupled with minimum social benefits to be provided by government to the bankrupted debtors. The legislation makes a provision for “Bankruptcy Rehabilitation Fund” and if the tribunal feels necessary it can grant a loan from the fund to a bankrupted debtor.

There is however one limitation to this legislation. It deals with only individuals and does not bring within its ambit the  corporation, joint ventures, companies, or partnerships etc.