Rajasthan CM writes to PM Modi to amend Bankruptcy Code to safeguard state's assets

Gehlot has pointed out discrepancies in the law, stating that the objective of this Code should be to restart the locked-down or sick industrial units and thus protect the interests of workers.

Published: 01st October 2019 09:26 PM  |   Last Updated: 01st October 2019 09:26 PM   |  A+A-

Rajasthan CM Ashok Gehlot

Rajasthan CM Ashok Gehlot (File Photo | PTI)

By ANI

JAIPUR: Chief Minister Ashok Gehlot has written to Prime Minister Narendra Modi, requesting him to safeguard the state government's assets and interests of workers in the eventuality of insolvency of a public enterprise.

Chief Minister Gehlot has also requested Modi for making suitable amendments in the Insolvency and Bankruptcy Code (IBC), 2016, an official release said.

Gehlot has pointed out discrepancies in the law, stating that the objective of this Code should be to restart the locked-down or sick industrial units and thus protect the interests of workers employed therein as well as save the state properties.

But, he wrote, many provisions of the law were against the stakes of the workers and the state.

The Chief Minister further said that in the event of liquidation of an enterprise, the Code provided for payments of salaries and wages to the workers and other employees for 24 months.

"Such a meagre payment would not be enough for the workers facing the crisis of livelihood and would cause unrest among them. Sometimes this would cause a law and order issue too," he added.

Gehlot said that any government enterprise would consist of the investment of government land, building and other invaluable assets into it.

"But, in the circumstances of liquidation of this unit, the bankruptcy code provided no priority for repayments against these investments and other crown dues. It was a serious howler in the law," the Chief Minister said.

He stated that in the event of liquidation of the enterprise, the process of the sale of bank loans lacked transparency.

"In such a case, for the valuation of the properties of the sick unit, the government would have no option but to depend upon the Asset Reconstruction Company (ARC) and the Resolution Professional appointed for the purpose," read the release.

The Chief Minister stated that in most of the cases, the ARC would buy the original bank loans at the lowest payment and file its claims before the Resolution Professional by hiking the loan price manifold.

"As a result, the ARC, which generally would be a private company, would pay a small amount and would become the sole proprietor of all the assets of the sick unit, including the land, building and other properties," the release said.

Gehlot suggested the Prime Minister should have serious thinking on the above-stated issues and make suitable amendments in the IBC, 2016 for the safeguard of the stakes of the state government as well as the workers.

"If the Code was not properly amended, several government enterprises could be sold off to the private companies on paltry payments and the state as well the employees and workers would face a loss of their due rights," he said.

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