Lenders, shareholders and employees can request for an employer's immovable assets to be attached guarantee for loans by the promoters of a company to recover dues under the new bankruptcy law. SBI Takes Over Liquor Baron Vijay Mallya's Goa Villa, Staff Booted Out And Replaced With Bouncers. The Insolvency and Bankruptcy Code approved by Parliament earlier this month empowers employees, creditors and shareholders to initiate resolution process at the first sign of financial stress like a default on repayment of a bank loan, Economic Affairs Secretary Shaktikanta Das said. If the issue persists even after the extended nine-month resolution period, they can seek attachment of all immovable assets, including overseas ones, that the promoter had given as personal guarantee for taking loan, Das said. "I would not like to comment on any specific company or case," he said, when asked if the provision can be invoked against businessman Vijay Mallya, who is now living in the UK after defaulting on payment of over Rs 9,000 crore of dues to public sector banks.

SBI Is Auctioning The Kingfisher House To Make Up For Crores That Mallya Didn't Return

Changing the financial sector architecture in India

The new law, Das said, will change the financial sector architecture in India as it will create "a new and vibrant ecosystem where resolution of companies which are in financial distress will be possible quickly and in a time bound manner". "Now the power to initiate the process of resolution, or failing resolution liquidation is right of every stakeholder. Stakeholders would include creditors, financial creditors, operational creditors, also includes workmen and employees," he said. Citing example, he said if the workers and employees were not getting salaries for months together, it obviously is a sign of financial distress of the company. And so the employees can file an application for initiating the resolution proceeding.

"If resolution proceedings are not feasible then you go for liquidation," he said. "So therefore, at the earliest sign of financial distress you can initiate the process and the NCLT will take a decision within 14 days on whether the case has to be admitted and taken up under the resolution process."

Once it is put in the resolution process, a Committee of Creditors (CoC) will be formed which within 180 days state if resolution is possible or not. If resolution was not possible, liquidation process would be initiated, he said. "Any personal guarantee given by the promoter can be sold to pay back employees or creditors. The property can be within India or outside," he said.