Resolution of Debts and Insolvency and Bankruptcy Code, 2016: The Status of Government Dues and Taxes

Abstract

The resolution of Corporate Debts has always been an intrinsic issue for the Government, because increase in distressed units would have a cyclic effect on the growth of the Indian economy. Therefore, since 1985, the Government has tried to arrest financial distress by way of statutory solutions. First, it was Sick Industrial Companies (Special Provisions) Act, 1985, and thereafter, a number of other legislations such as, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 were passed, but these efforts went in vain, since non-performing assets (NPA) kept escalating. The Insolvency and Bankruptcy Code, 2016 (IBC, 2016) was passed with much enthusiasm to check these increasing NPAs. But, with the passage of time, it has been realised that, IBC 2016 has not been that effective when it comes to combatting the growth of NPAs or recovery of debt especially of the government authorities. The worst hit is the recovery of the state taxes. Taxes are the links between the state and development of an economy, as they are collected for utilisation towards welfare goals of the government and therefore, any deficiency in the collection of taxes, has a direct impact on the prevalent inequality in the society and it also directly affects the rights of the vulnerable groups and marginalised classes, such as, their right to food, health and shelter and other human rights’ issues. The objective of the present research article, therefore, is first, to analyse the different legislations passed by the Parliament to look at the pertinent issues related to NPAs and collection of taxes. Second-, the purpose is to examine as to how the non-recovery of taxes directly affects the State welfare schemes, which further directly affects the human rights of the weaker sections of the society and vulnerable classes and third, as to how IBC, 2016 has addressed the issues of recovery of tax dues.