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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.
The Committee noted that the Companies (Second Amendment) Act, 2002 had brought about significant changes in the provisions dealing with rehabilitation/winding up / liquidation of companies in the present Act and had also proposed that an institutional structure for the purpose be set up in the form of NCLT/NCLAT.
This Institutional Structure, which would provide the desirable single independent forum is yet to be constituted.
7.2 Where circumstances justify, the process should allow for easy conversion of proceedings from one procedure to another.
This will provide opportunity to businesses in liquidation to turnaround wherever possible.
6.2 Corporate insolvency should be addressed in the Company Law.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.There is no need of a separate Insolvency Law for the present.Liquidation and Rehabilitation 7.1 The Insolvency law should strike a balance between rehabilitation 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.