Set out below is a short update on the Banking Regulation (Amendment) Ordinance, 2017 issued by the Government of India yesterday (Ordinance) inter alia empowering the Reserve Bank of India (RBI) to intervene and issue directions to banks for resolution of stressed assets.  The Government has promulgated the Ordinance with immediate effect, instead of waiting for an enactment to be passed by Parliament, which could at the earliest, have been possible only in the next parliamentary session in July 2017.

Key developments in the Indian legal landscape in 2016

From the Startup India campaign launched in January 2016 to the coming into force of substantial provisions of the Insolvency and Bankruptcy Code in December 2016, the legal landscape in India has witnessed some crucial developments this past year. In this LawFlash, we describe briefly what we consider to be some of the key legal and regulatory developments in India in 2016.

Arbitration Act

The Insolvency and Bankruptcy Board of India (IBBI) has notified Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Liquidation Process Regulations

The National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal were established in June 2016 to adjudicate upon company law matters in India. The Central Government by Notification No. S.O.1936 (E) dated 1st June, 2016, appointed 1st June, 2016 as the date on which all proceedings pending before the Company Law Board would stand transferred to the NCLT. Now, the Ministry of Corporate Affairs has notified the Rules on 7th December, 2016, by Notification No. G.S.R 1119(E), to provide for transfer of matters pending before the Company Law Board to the NCLT.

For several years, India has had various overlapping laws and adjudicating authorities for dealing with financial distress and insolvency, which has often resulted in multiple proceedings being initiated before different forums in situations of distress. This in turn has resulted in ineffective and delayed recovery or restructuring and placed excessive strain on lenders.

Background

Overview

The following propositions for cross-border security and insolvency law in Scotland have recently been supported at first instance in the Court of Session:

1. a floating charge need not be valid and enforceable under the law governing foreign assets charged in order to be considered valid and enforceable over such assets for the purposes of appointing an administrator out of court under the Insolvency Act 1986 (the IA);

Preamble

With a new Insolvency and Bankruptcy Code that has become effective on 1 December 2016, India seeks to expedite the process for creditors seeking payment or foreclosure through the courts.