Welcome to INSOL India Newsletter Volume 15, Issue September | Oct 15, 2018

We welcome you to this edition of the INSOL India newsletter. The Insolvency and Bankruptcy Code (Code), which has revolutionised the insolvency landscape of the country, is itself in a constant state of flux.

 

We have seen some landmark rulings in the recent weeks and in this newsletter we have highlighted a few key ones for your perusal. The Centre recently amended the Code, allowing payment to operational creditors to be prioritised over payment to financial creditors under a resolution plan. Also, the distinction between assenting and dissenting financial creditors in a resolution plan is sought to be struck off. While this effort to address the concerns of small and unsecured creditors is appreciable, it remains to be seen if the Committee of Creditors (CoC), which comprises only financial creditors, will be compelled to negotiate a better deal from bidders.

 

The Insolvency & Bankruptcy Board of India (IBBI) is also finalising rules to operationalise insolvency of personal guarantors in companies. These rules, once institutionalised, will make promoters and their holding companies liable to direct action and covered under the same adjudicating authority (NCLT) where the original action on the Corporate debtor was initiated.

 

The next edition of the World Bank’s Doing Business report is around the corner. The government will be expecting India’s position to be further strengthened due to improved performance on the parameter of resolving insolvencies.

 

This edition covers the latest in the world of insolvency in the country. Bankers have been vocal in requesting for amendments to the Companies Act to align it with the Code. In an interesting turn of events, the Supreme Court stayed the RBI’s February 12 Circular, which had instructed banks to identify signs of stress in loan accounts and initiate insolvency proceedings. This Circular was challenged by companies in the power sector, as well as the textile and shipping sectors, arguing that the reasons for stress in the sector are external and unforeseen. The next hearing on the matter is scheduled for 14 November, giving banks some additional time to finalise the resolution plans.  The most watched Insolvency case in India – Essar Steel – finally appears to be heading towards a resolution after Supreme Court issued a detailed judgement recently on the matter. We will cover this in more detail in the next edition of the newsletter.

 

I hope you will find the newsletter informative. As always, please do share your valuable feedback, especially on the topics you would like us to address.  Also, I encourage the readers to share their vast knowledge on this subject by contributing articles to this monthly newsletter. You may write in to our editorial team at newsletter@insolindia.com

 

 

Greetings!

Welcome to yet another issue of the newsletter!
I am sure you would enjoy reading this issue also. There are interesting news and views in this issue as well. In a decisive judgment titled “Numetal Ltd. v. Satish Kumar Gupta & Others,” the Hon’ble NCLAT has directed to exclude the period the appeal was pending before it for the purpose of counting the total period of 270 days. The Hon’ble Tribunal has also directed one of the Resolution Applicants to make payment of all overdue amount with interest in relation to ‘connected party,’ so as to enable it get the benefit of second proviso to sub-section (4) of Section 30, inserted in the Code on November 23, 2017. Insolvency matters are increasing in number before the Adjudicating Authorities and new issues are surfacing often. The government’s plan to have eight special Benchesof the Adjudicating Authority/ NCLT is a step in the right direction. We need to have an efficient system in place, so that the history of ‘backlog’ will not haunt the insolvency terrain, where things are fine now. Adding more Benches is just one thing; proper system and meticulous running of the same is a different kettle of fish. INSOL India assisted the Bar Associations of the Adjudicating Authorities to ensure proper infrastructure development so as to cope with the rising demand. The Hon’ble High Court of Delhi has called for a status report from the Government incompliance with the infrastructure needs of the Adjudicating Authorities as contained in their report to the Hon’ble High Court.

I would like to share a piece of glad news. Because of its fast growth in membership volume, profile and other activities during the past two years, INSOL India has become one of the top ten member associations of INSOL International, earning it eligibility to have representation on the Board of INSOL International. Hon’ble Mr. Justice A.K. Sikri, Judge, Supreme Court of India, who is part and parcel of INSOL India and is its Past President, has been unanimously recommended by the Board of INSOL Indiato be on the Board of INSOL International. Insolvency and bankruptcy resolution needs careful handling. Only smart processes with a high degree of transparency and dexterity can bring the desired results.