Answer ... The introduction of the Insolvency and Bankruptcy Code in December 2016, coupled with swift legislative changes (by way of various timely amendments) and fast-evolving jurisprudence (in the form of landmark case law), has given a significant boost to the restructuring and insolvency landscape in India. The latest amendments to the Insolvency and Bankruptcy Code, introduced in August 2019, gave the creditors’ committee the freedom to decide on the distribution of value proposed under resolution plans, which may take into account the order of priority among creditors, including the priority and value of security interests of secured creditors.
One of the burning topics in the Indian insolvency regime is the treatment of different stakeholders under resolution plans. In Essar Steel India Limited, the Supreme Court of India recently upheld the primacy of the creditors’ committee to decide on how the proceedings from a resolution plan will be distributed, and held that the National Company Law Tribunal and the National Company Law Appellate Tribunal cannot interfere on the merits with the commercial decision taken by the creditors’ committee in this regard. The Supreme Court has thus unequivocally confirmed that as long as the provisions of the code and the underlying regulations have been met, the requisite majority of the creditors’ committee is free to negotiate and accept a resolution plan, which may involve differential payments to different classes of creditors; and to negotiate with a prospective resolution applicant for better or different terms, which may also involve differences in distributions between different classes of creditors. Equitable treatment is to be accorded to each creditor depending on the class to which it belongs (ie, secured or unsecured; financial or operational).
Another hot topic pertains to process timelines. In Essar, the Supreme Court interpreted the latest Insolvency and Bankruptcy Code amendments on timelines and held that 330 days is generally the outer limit within which resolution of the stressed assets of the debtor must take place before the debtor is put into liquidation. However, in certain exceptional cases, this timeframe can be extended.
Other prevailing trends include cross-border insolvency, group insolvency, individual insolvency, liquidation as a going concern, treatment of statutory dues and the binding effect of resolution plans on government authorities.
Expected developments and legislative reforms in the near future include those pertaining to the establishment of regulatory mechanisms for group insolvencies and cross-border insolvency. Also in the pipeline is the development of a framework for individual insolvency, encompassing individuals, proprietorship firms, partnership firms and personal guarantors.