Welcome to INSOL India Newsletter Volume 19, Issue January | Feb 20, 2019

We welcome you to this edition of the INSOL newsletter. With the Insolvency and Bankruptcy Code, 2016 (IBC or the Code) recently completed two years, scrutiny on its effectiveness in resolving the stressed assets scenario of the country has increased. While respondents of the latest FICCI-IBA survey reported a decrease in non-performing assets and a positive experience in recoveries since the implementation of IBC, they raised concerns around the delays in completion of resolution proceedings. The jury is still out there….

In a major boost to the Code, Hon'ble Supreme Court, in a recent case, upheld its constitutional validity and dismissed all petitions that challenged its provisions. It explained that scope of judicial review of an economic legislation is limited and that it does not sit in judgment over such legislation unless it is palpably arbitrary. Hearing arguments on the Code discriminating against operational creditors and taking away the fundamental rights of promoters, the SC pronounced that the Code is “proving to be largely successful” in dealing with bankrupt companies. This judgement will come as a big setback for promoters of companies who are vying for control of their debt-laden companies. 

In a recent development, RBI, in order to facilitate the resolution process, has permitted bidders of insolvent companies to raise funds through the ECB route to be utilised for repayment of term loans availed by a corporate debtor. This move is expected to aid resolution by providing resolution applicants access to relatively cheap foreign capital. However, would have been useful to clarify if the relaxation is only for term loans or working capital and non-fund based facilities as well.

Another recent Supreme Court judgement has held that resolution plans submitted in relation to the corporate insolvency resolution process of a corporate debtor are to be shared with the erstwhile board of directors of the corporate debtor.  Also, IBBI has amended the CIRP regulations with an objective to ensure specific performance by successful Resolution applicants

Also, Corporate affairs secretary Mr Injeti Srinivas has also indicated that the government is mulling deemed admission’ of Section 7 cases of corporate defaults to the National Company Law Tribunal (NCLT) as well as a cross-border insolvency framework. Deemed admission will reduce the burden on the NCLT and allow it to focus on the core issues of insolvency cases.

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 contact@insolindia.com

Greetings and welcome to the current issue of your Newsletter!

Since the Insolvency and Bankruptcy Code 2016 came into being, recovery of debt, reconstruction of assets, turnaround etc., have gained a new meaning and ground, and ‘resolution’ has become the outstanding word, principle and practice.

While the process has evolved fairly well and is quietly flavouring insolvency jurisprudence, it has developed its share of bottlenecks as well.  As compared to century old legislations, this two-and-a-half year old one has made steadfast progress.  In its recent judgment in Swiss Ribbons Pvt. Ltd. v. Union of India, what the Hon’ble Supreme Court observed is worth repeating and re-repeating:

We are happy to note that in the working of the Code, the flow of financial resource to the commercial sector in India has increased exponentially as a result of financial debts being repaid. Approximately 3300 cases have been disposed of by the Adjudicating Authority based on out-of-court settlements between corporate debtors and creditors which themselves involved claims amounting to over INR 1,20,390 crores. Eighty cases have since been resolved by resolution plans being accepted. Of these eighty cases, the liquidation value of sixtythree such cases is INR 29,788.07 crores. However, the amount realized from the resolution process is in the region of INR 60,000 crores, which is over 202% of the liquidation value.

What was stated in my previous message (in the January issue of the newsletter) that the learned Adjudicating Authorities made notable contributions in the development of insolvency jurisprudence stands highlighted by the Apex Court’s judgment.  The concluding part of the judgment has an encouraging dose of appraisal:

These figures show that the experiment conducted in enacting the Code is proving to be largely successful. The defaulter‘s paradise is lost. In its place, the economy‘s rightful position has been regained.

Other usual views and comments are in the following pages.

As you are aware, INSOL International is holding its Annual Regional Conference at Singapore from April 2 – 4, 2019.  Needless to say, it will