In a bid to protect the interests of workers of a company that has gone bust, the parliamentary panel on the bankruptcy code has said all social security funds due to them must be kept aside in dealing with such cases.
The Joint Committee on Insolvency and Bankruptcy Code, chaired by Bharatiya Janata Party MP Bhupender Yadav, has also asked the government in its report, tabled on Thursday, to consider doubling the period of payment of dues in insolvency cases pertaining to the state or central government.
"The committee after in depth examination are of the view that provident fund, pension fund and the gratuity fund provide the social safety net to the workmen and employees and hence need to be secured in the event of liquidation of a company or bankruptcy of partnership firm, " the report said.
"The Committee, therefore, feel that all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund should not be included in the liquidation estate assets and estate of the bankrupt. "
The committee observed that in the case of central government and states, the dues to workers be paid for 24 months.
"To protect the interest of the workmen, the committee are of the view that workmen dues for a period of 12 months as provided in the waterfall under Clauses 53 and 178 may be increased to 24 months preceding the liquidation commencement date. "
Finance Minister Arun Jaitley had said on Wednesday that the proposed Bankruptcy and Insolvency Code had been cleared by the joint committee and was likely to be discussed during the current session of parliament.
The new code is also among the steps being taken by the government to deal with the problem of mounting bad loans of state - run banks, he said.
The proposed law aims to reduce delays in resolution of insolvency cases and improve recoveries of amount lent to companies.
It proposes a timeline of 180 days, extendable by another 90 days, to resolve cases of bankruptcy.
It also provides for the creation of an Insolvency and Bankruptcy Fund and an Insolvency and Bankruptcy Board of India to regulate stakeholders, such as professional, agencies and information utilities.
The draft bill was prepared on the basis of the recommendations from the Bankruptcy Law Reform Committee, headed by former law secretary T. K. Viswanathan.
The committee had submitted its report along with a draft bill in November, following which the bill was tabled in the Lok Sabha on December 21 last year.