• Saturday, August 8, 2020

Insolvency/ Bankruptcy Law

Discussion in 'Pakistan Economy' started by 1Paki$tani, Apr 24, 2019.

  1. 1Paki$tani

    1Paki$tani FULL MEMBER

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    Hi Guys

    Just starting a thread regarding one of the major issues that is faced by Pakistan and that either leads to bad debts for the bank or circular debt for power companies.

    I fail to comprehend why GOP and now PTI government to date has not attempted to bring in some form of Bankruptcy / Insolvency laws for both individuals and corporations.

    Historically we had many individuals and companies having their loan written off or that many companies and influential individuals have not paid for things such as usage of electricity, fuel purchase, air port charges (air blue) etc. This has lead to banks having large amount of bad debts which costs the economy billions and creates a situation of many institutions which are state owned thus either require bail out or increase in utility prices.

    Take recent examples such as Air Blue not paying CAA for airport usage and Hina Rubani Khar and her company having outstanding bill to WAPDA in the amount of about 20.7 million or what ever the amount. But the fact that she or her corporation owes money and she continues to enjoy supply of power.

    So it is fundamentally important we have proper bankruptcy and insolvency laws in place to recover these amounts and also provide people who are caught in bad situations a way out. The laws can be model on western version so to allow both a carrot stick approach.

    The laws will allow the creditor to either obtain a full payment or seek to have the individual bankrupt. IF a person or corporation is declared bankrupt it will allow the creditor - mostly banks and government institutions to appoint a administrator to take full control of the individual or corporation's assets with the intention to sell those to pay the creditors their full due and if any thing left over it can than be return to the original owner.

    Similarly law should require banks and state institutions to obtain personal guarantees of their directors and/or shareholders to ensure if the corporation are either deliberately made to default on the loans or other payment than those individuals can be held liable together with corporation.

    This should resolve the issue of bad debts and debt write offs and with the administrator appointed the administrator takes full control include all the books of the business would allow the administrator to make discovery of transactions to circumvent bankruptcy laws.

    In my opinion these laws are need of the hours and I am at absolute loss that we dont have them and if we do, it seems to be silent and non-existent. We are beating around the bush rather than cleaning it up.

    I am equally disappointed with law minister who promised allot but is yet to deliver on anything.

    What do you guys say?

    -----------------

    PS: can we keep this discussion on the subject matter and not get into tussle of PTI v PMLN V PPP v whatever party.
     
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  2. Samlee

    Samlee SENIOR MEMBER

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    We Definitely Need A Bankruptcy Code.It Will Help Boost Investor Confidence
     
  3. ps3linux

    ps3linux FULL MEMBER

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    It is something which needs to be addressed, but truly even if any law is promulgated I don't see any end to the problem.

    For an individual till Iftikhar Chaudhry came in as CJ, any late payment on credit card, auto and mortgage was a nightmare any person doing it he'd had one hell of a joy ride. Good thing he did put a ban on these recovery jacka**, Autos can/should be recovered, credit card a different story now. Mortgage/house almost inline with international laws in case of bankruptcy even in USA under chapter 7 or 13 individual can retain a car and homestead. However an late payment over 1 day is reported to SBP ECIB system and the record is maintained for 365 days. Any default goes not only to ECIB but data check as well, data check maintains the data for 10 years. Any delay in payment for over 30 days and technically speaking no bank in their right mind approved any further loan to that individual except may be NBP, ZTBL, FWB,BOP,SB, BOK, BOAJK, and SME Bank you know why. Individual defaulter is most often circumstantial, while in case of politicians and corporate it is always deliberate or as we call it willful.

    Now coming to corporate its a totally different ball game any individual/company going into default these crooks will establish another company with front-man, in the name of wife, adult children. Just read details on Omni group how Sind Bank was created and how it helped a person having a network of few lacs became a billionaire in few years.

    In my opinion there should not be any bank owned by GoP or provincial Govts for that matter even *** like ZTBL that really is the root cause, Govt meaning politicians their accomplice bureaucrats etc, arm twist banks to lend to the crooks even in case of bad credit history and state/province owned banks still do.

    Next stage banking courts where if the defaulter is weak decision is made once the judge is assured of bank's monetary palm greasing read blatant bribery by the bank, also known as hiring the judge. If the defaulter is politically connected first the bank will not show any interest in launching a case rather than booking it as NPL and perform 100% provisioning as per law and screwing tax payers if state owned share holders if private. even if a decision is made in favor of the bank equally crook liars (not lawyers) represent the crook, even if the bank wins the case from supreme court, these crook lawyer get a restraining order against recovery.

    e.g 742 billion rupees was collected by SNGPL, SSGC from consumers over 7 years as gas development charges, only 342 billion was paid to Govt, rest 400 billion default and from what I hear a financial NRO is on way for these crook companies. Another interesting case is matter of over 100 billion subsidy to fertilizer sector, including ENGRO FERT, Asad Umer was an accomplice.

    I dont think we need any more law what we need is character building for this nation where a corrupt finance secretary will be appointed as AGPR, the thefts that he did in his tenure he will spent the next three years hiding them. A crook and corrupt politician will become head of standing committee on public account and will be humiliating intentionally same officers who are investigating his cases, a dozen or so crook lawyers will represent all crooks in the country, courts will grant relief to crooks and screw ordinary Pakistani.

    Frankly we don't need new law what we need implementation of law in letter and spirit and lot and lots of cleaning.
     
  4. nahtanbob

    nahtanbob BANNED

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    What are Pakistani laws on individual and corporate bankruptcy ?
     
  5. Crusher

    Crusher SENIOR MEMBER

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    This "american" is only interested in pakistani affairs but he has no interest in america related threads on this forum.
     
    Last edited: Apr 25, 2019
  6. ps3linux

    ps3linux FULL MEMBER

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    I ll address the corporate laws later but for chapter 7 and chapter 13 bankruptcy nothing (you know these are for individual bankruptcy laws in U.S) , there are no specific laws, laws here were made to accommodate the banks/F.I and screw individuals, the precedence to protect individuals from the clutches of banks/f.i bouncer/collector was established through supreme court decisions.
     
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  7. nahtanbob

    nahtanbob BANNED

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    Since pakistan was british colony i assume you inherited british personal bankruptcy laws which was not great
     
  8. ps3linux

    ps3linux FULL MEMBER

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    British laws or what we call Pakistan Penal Code (ACT XLV of 1860) were made in 1860 keeping in view that these laws were/are for a "colony" populace what even today is called as "awaam" in local language and "commoner" in English, laws were different for their own kind.
     
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  9. OldenWisdom...قول بزرگ

    OldenWisdom...قول بزرگ FULL MEMBER

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    Finally someone who brings to fore the real problem. I wish there were more and a deeper look on how the state and more fundamentally the psyche of the people has been affected by colonial past and how it continues to enslave modern day people with just an illusion of freedom. People forget how wealth was actually transferred to G.B. as studied by Utsa Patnaik in her study. But the issue is that it continues to happen unabated to this day! Pakistan maybe a prosperous country on its own right(perhaps) but it has to buy everything outside in a foriegn currency which taxes the whole population of the country! Wealth is essentially being taken out of Pakistan and every other country in a similar circumstance. Ever wonder why Pakistanis or Indians or South Americans love to work in the West? Eventhough most live miserable lives, living in similar or worse conditions of their former countries. Working hard labor and willing to do it for less than the citizens of that country? It has all to do with the EXCHANGE RATE. These people live hard lives and work long hours to send their savings to 'home' country and when they travel back they have money to spend due to again "EXCHANGE RATE"!

    That was only one thing since the topic runs deep but because what East India Company did is so relevant when Colonial past is discussed. Either way the laws were set to subjugate and pacify a people not to get things done. Only enough was done to get the wealth moved to its masters. Essentially the state was a permanent parasite just like today. And people only saw wealth in inflation, i.e. more promises created. There is a lot that can be said and it is not bite size. But nice to see people actually scratching the surface.
     
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